- Raymond James analyst Bobby Griffin reiterated a Strong Buy rating on the shares of Tempur Sealy International Inc TPX and raised the price target from $35 to $45.
- While industry trends remain negative, the analyst is starting to see evidence demand is stabilizing and Tempur-Sealy continues to perform well on a relative basis versus its peers.
- 2022 U.S. bedding units likely ended down 15% - 20% y/y, flushing out the 2-year COVID bump in the analyst's opinion and bringing consumption back below 2017 levels.
- Accordingly, even with the current macro environment, 2022 could mark the low point in earnings for TPX, especially if inflation continues to modestly moderate in 2023, added the analyst.
- TPX's stock has made a strong move over the last three months (up 36%), as the potential for Serta Simmons' bankruptcy increased and speculation is growing for a potential Mattress Firm acquisition following Mattress Firm pulling its S-1 filing, said the analyst.
- Nonetheless, in the analyst's view, the fundamentals on TPX remain intact. The analyst continues to view the risk/reward set-up favorably with EPS likely bottoming in 2022/early 2023, and solid earnings growth potential over the medium to long-term.
- Given the change in Mattress Firm's IPO plans, the current industry dynamics (SSB filing bankruptcy), and the view that 2022/early 2023 could mark the bottom for units, the analyst's curiosity about a potential deal has also increased.
- According to the analyst, the Mattress Firm acquisition would be highly accretive to Tempur Sealy.
- On a high level, Tempur Sealy acquiring Mattress Firm could make sense given the vertical integration of the two businesses and recapture of gross profit dollars on the consolidated business, the analyst specified.
- Price Action: TPX shares are trading higher by 1.45% at $38.88 on the last check Thursday.
- Photo Via Company
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