On Wednesday, Piper Sandler adjusted the price target for Leggett & Platt (NYSE:LEG), a diversified manufacturer of engineered products and components, moving the target down to $13 from the previous $16. Despite this change, the firm has maintained an Underweight rating on the stock.
The revision follows Leggett & Platt's first-quarter results, which included a slight earnings per share (EPS) miss and a substantial cut to the company's dividend. The dividend was reduced by 90%, marking a significant shift for a company that had increased its dividend for 51 consecutive years.
The company also reiterated its full-year guidance amidst the financial update.
The quarterly report showed a marginal revenue shortfall, with all three business segments experiencing sales declines and unit volume decreases compared to the fourth quarter. This downturn reflects broader challenges within the consumer durables sector. Industry sales for mattresses and furniture, as indicated by Piper Sandler's surveys, saw declines in the first quarter that were in line with the fourth quarter, suggesting that Leggett & Platt may be losing market share.
The price target adjustment by Piper Sandler is based on a reduced earnings multiple assumption of 10 times the estimated 2025 EPS, down from the previous multiple of 14 times the estimated 2024 EPS. This change is attributed to the impact of the dividend cut on investor sentiment.
Leggett & Platt is scheduled to conduct an earnings call at 8:30 am ET tomorrow. Piper Sandler noted that subsequent refinements to their model estimates may occur following the earnings call discussion.
InvestingPro Insights
Recent data from InvestingPro provides a deeper look into Leggett & Platt's financial performance and market position. With a market capitalization of $2.42 billion, the company's adjusted price-to-earnings (P/E) ratio for the last twelve months as of Q4 2023 stands at 13.12, reflecting investor assessments of its earnings potential. Despite a revenue decline of 8.19% during the same period, Leggett & Platt maintains a dividend yield of 10.18%, a testament to its commitment to returning value to shareholders.
One of the key InvestingPro Tips for Leggett & Platt is its high shareholder yield, which is particularly relevant given the recent dividend cut mentioned in the article. The company's ability to maintain significant dividend payments to shareholders for 54 consecutive years, even with the recent reduction, demonstrates a long-standing commitment to shareholder returns. Additionally, Leggett & Platt is trading near its 52-week low, which may present an opportunity for investors considering the company's historical performance and future growth expectations.
Another point to consider is that analysts predict the company will be profitable this year, aligning with one of the InvestingPro Tips that suggests net income is expected to grow. This insight, combined with the company's track record of dividend growth and the expectation of profitability, could influence investor sentiment and future valuation.
To explore additional InvestingPro Tips, which include insights on the company's liquidity and gross profit margins, visit InvestingPro. There are 11 more tips available, providing a comprehensive analysis for investors. For those interested in subscribing to InvestingPro for a deeper dive, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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