LEG: Stabilizing Bedding Demand And Acquisition Proposal Will Shape Future Risk Balance

Analysts modestly cut their price target on Leggett & Platt to $9.00 from $10.00, citing still soft residential demand and only gradual signs of stabilization in bedding markets despite a slightly improved mattress industry outlook for 2025.

Analyst Commentary

Analysts remain balanced on Leggett & Platt, highlighting a mix of early signs of stabilization and persistent structural challenges that temper near term upside for the shares.

Bullish Takeaways

• Bullish analysts point to choppy but stabilizing market conditions as a sign that downside to earnings and cash flow may be increasingly limited, supporting a floor under valuation around current levels.
• The modestly improved 2025 mattress industry outlook to a low single digit decline is viewed as an early step toward eventual volume normalization, which could support a gradual rebound in top line growth.
• Management’s decision to wait for a clearer macro inflection before aggressively pursuing Bedding recovery initiatives is seen as disciplined execution, helping protect margins and capital returns.
• Neutral ratings alongside a lower but still supportive price target suggest that while near term upside is capped, analysts see room for multiple expansion if demand conditions improve faster than expected.

Bearish Takeaways

• Bearish analysts underscore that residential end market demand remains soft, limiting near term revenue growth and constraining the company’s ability to leverage fixed costs.
• The cut in price target to $9 reflects tempered expectations for margin recovery and returns on capital, as management continues to navigate a sluggish housing and consumer spending backdrop.
• Ongoing reliance on a macro driven Bedding recovery introduces execution risk, with timing uncertainty potentially weighing on valuation and investor confidence.
• With the mattress industry still expected to decline in 2025, even at a low single digit rate, bears worry that any growth reacceleration could be slower and more muted than prior cycles, limiting earnings power over the medium term.

What's in the News

• Somnigroup International proposed a $1.6 billion all stock acquisition of Leggett & Platt, offering stock valued at $12.00 per LEG share, with most management and employees expected to be retained and the deal contingent on regulatory, board, shareholder approvals and due diligence completion (Key Developments).
• Leggett & Platt raised its 2025 guidance, projecting sales of $4.0 to $4.1 billion, down 6% to 9% year over year, EPS of $1.52 to $1.72 and an EBIT margin of 8.4% to 9.0% (Key Developments).
• Management indicated it is actively considering small strategic acquisitions, particularly in the textiles business, emphasizing modest purchase prices and immediate synergy potential (Key Developments).
• The company reported no share repurchases in the July to September 2025 quarter, effectively completing a previously announced buyback program without deploying capital (Key Developments).

Valuation Changes

• Fair Value: Unchanged at $11.00 per share, indicating no shift in the long term intrinsic value estimate.
• Discount Rate: Fallen slightly from 11.90% to about 11.49%, reflecting a modestly lower perceived risk profile or cost of capital.
• Revenue Growth: Essentially unchanged at around negative 15.55%, signaling no material adjustment to long term top line expectations.
• Net Profit Margin: Stable at approximately 4.54%, suggesting consistent assumptions for long run profitability.
• Future P/E: Edged down slightly from about 11.19x to 11.07x, implying a marginally lower multiple applied to forward earnings.