Tempur Sealy Shares Surge 15% As Q3 Results Top View, Backs 2013 Outlook

(RTTNews) - Shares of Tempur Sealy International, Inc. (TPX) surged nearly 15 percent in extended trading on Wednesday after the mattress maker reported results for the third quarter that topped analysts' expectations.

The company reported a profit for the quarter compared to a small loss last year, despite a significant drop in margins, reflecting lower costs and charges as well as strong double-digit sales growth amid contribution from Sealy. The company also maintained its earnings and sales guidance for the full-year 2013.

The company completed the acquisition of smaller peer Sealy Corp. in mid-March for $2.20 per share in deal valued at about $1.3 billion, including outstanding debt. The results for 2012 do not include the Sealy results of operations.

"Overall our third quarter was in line with our expectations. The steps we have taken to improve Tempur North America's performance showed progress and led to a slight sales increase during the quarter. Our Sealy business also showed growth during the quarter," CEO Mark Sarvary said in a statement.

The Lexington, Kentucky-based company reported net income of $40.2 million or $0.65 per share for the third quarter, compared to net loss of $2.0 million or $0.03 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was $44.9 million or $0.73 per share, compared to $42.3 million or $0.70 per share in the year-ago quarter.

On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.68 per share for the quarter. Analysts' estimates typically exclude one-time items.

Net sales for the quarter more than doubled to $735.5 million from $347.9 million in the same quarter last year, and topped ten Wall Street analysts' consensus estimate of $709.91 million. The company attributed the sales growth to the inclusion of $390 million of Sealy sales.

The company's business segments now include Tempur North America, Tempur International, and Sealy.

Net sales for Tempur North America edged up 0.6 percent to $242.4 million, while Tempur international net sales declined 3.6 percent to $103.2 million from last year. Sealy net sales for the quarter were $390 million.

Consolidated bedding sales increased to $662 million from last year's $300 million, with Sealy bedding sales being $365.2 million.

"However, Tempur International results were slightly below our plan due to continued weakness in Europe. The integration with Sealy continues to progress well, cost synergies continue to track to our plan, and we remain very excited about our ability to capture significant revenue synergies,' Sarvary added.

Gross profit margin for the quarter contracted 880 basis points to 40.6 percent as a result of the inclusion of Sealy, which has lower margins than the Tempur North America and Tempur International segments as well as changes in product mix, offset partially by lower sourcing costs.

Looking ahead to fiscal 2013, Tempur Sealy continues to expect adjusted earnings in a range of $2.25 to $2.40 per share on projected revenues between $2.425 billion and $2.450 billion.

Street is currently looking for full-year 2013 earnings of $2.32 per share on annual revenues of $2.44 billion.

TPX closed Wednesday's regular trading session at $40.11, down $0.20 or 0.50% on a volume of 3.71 million shares. However, the stock soared a further $5.99 or 14.93% in after-hours trading.