A Tempur Sealy-Mattress Firm Reunion? Raymond James Says It's Increasingly Likely

Tempur Sealy International Inc TPX could be headed for a reunion with Mattress Firm, according to one analyst.

The Thesis

Although there has been no word about a deal between Tempur Sealy and Mattress Firm, all signs point to an increased likelihood for a potential reunion in 2019, according to Raymond James analyst Bobby Griffin.

Griffin says a potential deal is particularly appealing as we approach the winter Las Vegas market, “which always ushers in new mattress introductions.”

A potential tie-up with a restructured Mattress Firm increases the risk-reward scenario for Tempur Sealy, but the core fundamentals of Temper Sealy’s business and set up for 2019 is already favorable given the company’s valuation, he said in a Jan. 18 note.

“While the overall bedding environment is still challenging with the Chinese import headwind, Tempur Sealy’s third quarter results (~3% N.A revenue growth & 29% Tempur-Pedic unit growth), illustrates that company’s core N.A. business is growing and that the new Tempur-Pedic product introductions are resonating well in the marketplace.”

Channel checks with retailers over the last few months continue also indicate strong performance from new Temper-Pedic product introductions, with retailers having success stepping up customers into more the more expensive LuxeAdapt series.

Griffin also says the drop in oil prices and other raw materials creates an opportunity for the company to see year-over-year benefits from raw materials in 2H19.

Price Action

Tempur Sealy shares closed Friday at $52.47. 

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