LEG: Market Stabilization Will Support Recovery Despite Ongoing Residential Weakness

Analysts have lowered their price target for Leggett & Platt from $10 to $9 per share, citing continued softness in residential demand and a cautious outlook for Bedding recovery, even though there are some signs of market stabilization.

Analyst Commentary

Bullish Takeaways

• Markets are showing early signs of stabilization following recent volatility. This provides some optimism for a more stable operating environment in the near term.
• The company's updated outlook projects the mattress industry to return to low single-digit growth in 2025. This suggests a gradual recovery could support future revenue improvement.
• Management's focus on disciplined execution and cautious capital deployment positions the company to benefit from a broader market recovery when it occurs.

Bearish Takeaways

• Residential end-market demand continues to be soft, putting near-term pressure on the company's revenue and margins.
• Analysts remain cautious about the timing and magnitude of any bedding market recovery, as improvement depends on a stronger macroeconomic backdrop.
• The lowered price target reflects ongoing concerns around valuation and execution risk amid persistent uncertainty in key business segments.

What's in the News

• Leggett & Platt is exploring small strategic acquisitions, with particular interest in the textiles business to drive synergies (Q3 2025 Earnings Call).
• The company raised its 2025 earnings guidance, now expecting sales of $4.0 to $4.1 billion and EPS of $1.52 to $1.72, with EBIT margin projected between 8.4% and 9.0% (Corporate Guidance Raised).
• Earlier in the year, 2025 earnings guidance had already been updated, with the sales target adjusted to $3.9 to $4.2 billion and EPS increased to $1.43 to $1.72, reflecting more optimistic profitability expectations (Corporate Guidance Raised).

Valuation Changes

• Fair Value remains unchanged at $11.00 per share.
• The Discount Rate has risen from 11.44% to 12.26%, indicating greater perceived risk in the future cash flows.
• The Revenue Growth projection shifted from a positive 1.07% to a contraction of -0.16% year-on-year, reflecting lowered expectations for top-line expansion.
• The Net Profit Margin declined slightly from 4.65% to 4.54%.
• The Future P/E ratio increased from 10.50x to 11.38x, suggesting expectations of reduced future earnings against current valuation.