Tempur-Pedic - Aggressive Growth

Tempur-Pedic (TPX) analysts have raised their earnings estimates to the highest level in over 5 years. Much of that came on the latest earnings surprise.

Net income is expected to nearly double for this Zacks #1 Rank (Strong Buy), but how are the valuations?

Company Description

Tempur-Pedic makes unique mattresses and pillows out of the company's proprietary pressure-relieving material. You might remember the commercials with a woman jumping on the bed without spilling a glass of red wine.

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.

Sales up 32%

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.

Great Rebound

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.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
 
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