Mattress Firm Performance Looks Impressive As Tempur Sealy Works To Consummate Merger, Says Analyst

Wedbush analyst Seth Basham reiterated an Outperform rating on the shares of Tempur Sealy International Inc TPX with an unchanged price target of $50.

Mattress Firm's recent Q4 FY23 earnings suggest the retailer outperformed the industry on the topline while margins expansion accelerated sequentially, says the analyst.

Mattress Firm's sales of $1.18 billion increased 2.2% y/y, or down an estimated 5% y/y, excluding the benefit of an extra week in the quarter.

The analyst believes the sales was likely better than feared by investors given industry commentary that pointed to weaker-than-expected FY23 Q3 U.S. industry demand trends.

The topline performance, according to the analyst, suggested Mattress Firm Group is winning share at retail while the margin improvement points to solid accretion for TPX, if the deal is consummated. 

Related: Consolidation In The Mattress Industry? Don't Sleep On This

The analyst sees more upside than downside risk to TPX’s core business margins in 2024 from commodity cost benefits and operational efficiencies.

The analyst sees significant value in the proposed Mattress Firm acquisition and believes there is a greater than 50% chance of it being completed.

TPX is moving to appease antitrust concerns with respect to Mattress Firm acquisition, the analyst notes. If the FTC rejects the merger, the parties will likely litigate the decision, which would have to conclude in a relatively short period for TPX to reach its goal of completing the merger by 2H24.

Price Action: TPX shares are trading higher by 3.39% at $48.49 on the last check Wednesday.

Photo Via Company