On Monday, Tempur Sealy (NYSE:TPX) International, Inc. (NYSE:TPX) received an upgrade from Loop Capital, shifting from Hold to Buy, accompanied by a significant increase in the price target to $75 from the previous $50. This optimistic revision is primarily due to the anticipated financial benefits from the company's impending acquisition of Mattress Firm.
Loop Capital's revision comes after a detailed analysis of the potential impact of the Mattress Firm acquisition on Tempur Sealy's financials. The new price target of $75, set to take effect in 2025, reflects the expected value addition from the acquisition. The firm's confidence in the upgrade is bolstered by Tempur Sealy's recent announcement on March 12, which confirmed an agreement with Purple and provided a second-quarter timeline for the conclusion of the Federal Trade Commission's (FTC) review process.
Despite the likelihood of some store divestitures from Mattress Firm's portfolio, the analyst's valuation assumes around $300 million in sales will be divested. The estimation of cost synergies stands at $100 million, which aligns with the management's initial forecast for the deal. These figures are incorporated into the revised model for Tempur Sealy.
The updated estimates for Tempur Sealy, which are published for comparative purposes with the consensus, include some adjustments to the stand-alone margins, particularly gross margins for 2024. These adjustments reflect an anticipated improvement in the input cost environment, which is expected to benefit the company's financial standing moving forward.
InvestingPro Insights
Following the recent upgrade by Loop Capital, Tempur Sealy International, Inc. (NYSE:TPX) has shown several promising indicators that could interest investors. With a market capitalization of $9.53 billion, the company's commitment to shareholder returns is evident through its dividend policy, having raised its dividend for three consecutive years. This is a sign of the company's financial health and management's confidence in its future cash flows.
InvestingPro data also highlights that Tempur Sealy is trading at a high Price / Book multiple of 29.47, indicating that investors may be willing to pay a premium for the company's assets relative to its book value. Additionally, the company's Price / Earnings (P/E) ratio stands at 25.68, reflecting the market's valuation of its earnings. While the P/E ratio is a useful indicator, it's important to note that five analysts have revised their earnings downwards for the upcoming period, which could suggest tempered expectations for future profitability.
For those considering an investment in Tempur Sealy, it's worth noting that the company has been profitable over the last twelve months and analysts predict it will remain profitable this year. Moreover, the stock has experienced a large price uptick over the last six months, with a 29.84% total return, and is currently trading near its 52-week high. Investors looking for more insights and tips can find additional ones on InvestingPro, including a fair value estimate that may provide perspective on the stock's current trading price.
For a deeper dive into Tempur Sealy's financials and performance metrics, prospective investors can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With 9 additional InvestingPro Tips available, investors can gain a comprehensive understanding of the stock's potential and make more informed decisions.
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