Earnings to Nearly Double

Currently the Zacks Consensus Estimate for this year is pegged at $2.08, which would be an 86% growth rate. Estimates rose 11 cents on the latest quarterly report. Forecasts for next year are at $2.47, up 13 cents and an 18% growth rate.

Those estimate revisions came after Tempur-Pedic reported a 32% jump in sales, on Oct 19. With the top line swelling to $296 million, net income surged to $44.2 million, from $25.7 million a year before.

Earnings per share were up 82%, to $0.62. Analysts were looking for $0.55, giving Tempur-Pedic 10 consecutive earnings surprises.

In addition to the excellent results, the company went on to raise its full-year guidance.

Everyone needs a mattress but buying new ones, especially expensive ones, is highly discretionary. You can see how hard shares and the full-year estimates fell heading into the recession.

Fortunately earnings projections have roared back and are now just above the pre-recession levels. Thanks to those upward revisions shares are still trading with decent valuations as well.

The forward P/E is about 17 times and the PEG ratio is 1.1. While these levels do not scream value, they are in line with historical averages.