TEMPUR SEALY $60.32 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempursealy.com; Shares outstanding: 61.0 million; Market cap: $3.6 billion; No dividends paid) makes and distributes mattresses and neck pillows made of its patented memory foam, Tempur. Tempur Sealy’s earned $62.7 million, or $0.99 a share, in the quarter. That’s a 17.9% increase from the $53.2 million, or $0.86, a year earlier. Sales gained 2.9%, to $767.3 million from $745.5 million. North American sales (80% of the total) rose 3.8%. International sales (20%) fell 0.4%—but gained 12.1%, if you eliminate currency fluctuations.
Activist investor spurs big changes
Activist investor H Partners Management holds 10% of Tempur Sealy’s shares. It believes the company has performed poorly compared to other mattress makers since it bought rival Sealy in March 2013. Tempur Sealy spent $1.3 billion on the acquisition. That allowed it to offer traditional spring-coil beds. H Partners won the support of enough investors at the company’s May 8, 2015, annual meeting to force changes to the management and board of directors. Among those, the company named Scott L. Thompson as its new CEO and chairman. Thompson led carrental agency Dollar Thrifty Automotive until Hertz Global Holdings acquired it in 2012. Tempur Sealy’s long-term prospects are sound, and its new chief executive should bring a fresh perspective. However, the stock trades at a high 26.8 times the company’s forecast 2016 earnings of $2.25 a share. Tempur Sealy is a hold.
