Tempur Sealy To Face Earnings Risk From Cybersecurity Breach, Macroeconomic Trends, Says Analyst

Wedbush analyst Seth Basham reiterated an Outperform rating on the shares of Tempur Sealy International Inc TPX with a price target of $55.

A cybersecurity breach and a negative supplier read-through yesterday leave the analyst incrementally more cautious ahead of TPX’s 2Q23 earnings on August 3.

The breach has resulted in a temporary interruption to its operations, the analyst believes that TPX has already brought some of its of its critical IT systems back online, namely its Sealy systems.

The analyst thinks the incident is a minor headwind to the company, but with operations still not fully back to normal after a week and a full damage assessment unlikely by the time TPX reports earnings this Thursday, the lack of clarity could lead the company to err on the side of caution when its updates its FY23 outlook. 

The analyst mentioned the company’s peer, Legget & Platt Inc LEG, slashing its FY23 revenue growth guidance by 300 basis points based on continued macroeconomic volatility and low end-market visibility. 

During 2Q, weak consumer demand persisted in the bedding products segment that saw volumes (organic sales excluding raw material and FX impacts) decline 9% y/y, said the analyst.

The analyst feels Legget’s revised outlook for the rest of the year is a negative read through for the industry.

The analyst continues to like TPX’s long-term prospects based on market share gain opportunities, commodity cost declines, and the accretive acquisition of Mattress Firm if it is consummated.

The analyst move to the sidelines on TPX into the 2Q23 print as risks increase but retain the Outperform rating on a 12-month view.

Price Action: TPX shares are trading lower by 0.44% at $44.44 on the last check Tuesday.