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TPX – Market expectations are for Uniform ROA to improve, but management may be concerned about sales, debt repayment, and their online business

January 19, 2021

  • Tempur Sealy International, Inc. (TPX:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 21.1x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about sales growth, debt repayment, and their online business capabilities

  • Specifically, management may lack confidence in their ability to sustain growth in net sales, operating cash flow, and North America gross profit margins. Furthermore, they may have concerns about their acquisition of Sealy’s distribution rights in the UK, the repayment of debt taken on in the Sealy acquisition, and overtime labor costs. Moreover, management may lack confidence in their ability to initiate a quarterly cash dividend beginning in early 2021, further reduce leverage, and expand their digital capabilities