Bullish indicating open at $55-$60, IPO prices at $37
On Monday, Piper Sandler maintained an Overweight rating on Tempur Sealy International Inc. (NYSE:TPX) and raised its price target to $76.00 from the previous $65.00. The stock, currently trading near its 52-week high of $64.65, has shown remarkable momentum with a 29.48% return over the past six months, according to InvestingPro data. The adjustment follows a U.S. Federal Court decision on Friday that allowed Tempur Sealy’s acquisition of Mattress Firm to proceed. The Federal Trade Commission (FTC) has a seven-day window to appeal the decision, but the likelihood of a successful appeal is traditionally low.
The analyst at Piper Sandler projected that the acquisition could significantly increase Tempur Sealy’s earnings per share (EPS), estimating an accretion of $1.40-$1.90 over three years. With a current diluted EPS of $2.19 and a P/E ratio of 28.08x, this increase could result in an EPS of $5.50-$6.00 by 2027, indicating a compound annual growth rate (CAGR) of 30-34% from the expected EPS in 2024. InvestingPro analysis shows the company maintains a GOOD financial health score, suggesting strong fundamentals to support this growth trajectory.
The optimism surrounding the acquisition is partly based on survey results from two client events, which suggested that approximately 50% of Tempur Sealy investors were awaiting the court’s decision before committing to a full investment position in the company. Additionally, industry conditions appear to have improved in the fourth quarter compared to the first three quarters of the year, with stronger sales trends observed in January.
The raised price target of $76.00 represents a 21x multiple of the estimated 2026 EPS, which does not yet take into account the potential accretion from the Mattress Firm acquisition. The analyst’s positive outlook reflects the anticipated benefits of the merger and the recent improvement in the mattress industry’s performance.
In other recent news, Tempur Sealy International Inc. has experienced a series of significant developments. Following a recent legal victory over the US Federal Trade Commission, the company has been greenlit to proceed with its planned acquisition of Mattress Firm. This merger is expected to expand Tempur Sealy’s market presence and solidify its industry position.
Several financial firms have responded to these developments by upgrading their ratings and increasing price targets for Tempur Sealy. BofA Securities, Loop Capital Markets, and KeyBanc Capital Markets have all raised their price targets, reflecting confidence in the company’s growth prospects. Additionally, Piper Sandler has upgraded Tempur Sealy to an "Overweight" rating, indicating strong potential for the stock.
Tempur Sealy also reported a 2% increase in net sales to $1.3 billion and a 14% increase in GAAP EPS to $0.73 in Q3 2024. These financial results, along with the company’s strategic initiatives, including product innovation and potential acquisitions, have been noted by analysts, suggesting a positive outlook for the firm’s future performance.
Investors and market watchers will be closely monitoring the FTC’s next move as the appeal deadline approaches. If the deal proceeds without further legal hurdles, Tempur Sealy will have successfully overcome a significant regulatory challenge in its path to acquiring Mattress Firm.
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