TEMPUR-PEDIC $25.53 - New York symbol TPX

TEMPUR-PEDIC $25.53 (New York symbol TPX; TSINetwork Rating: Speculative) (800-878-8889; www.tempurpedic.com; Shares outstanding: 63.5 million; Market cap: $1.6 billion; No dividends paid) makes and distributes Swedish mattresses and neck pillows made from its proprietary Tempur material, which conforms to the body to provide support and help alleviate pressure points.

Tempur-Pedic’s shares are down 70.8% since they hit an all-time high of $87.43 in April 2012.

The decline came despite a strong 2012 first quarter in which Tempur-Pedic’s earnings per share rose 26.5%, to $0.86 from $0.68 a year earlier, and sales rose 18.0%, to $384.4 million from $325.8 million.

Lower forecast is a big negative

The company now expects to report 2012 earnings of just $2.70 a share, on revenue of $1.43 billion. That’s down sharply from its previous forecast of $3.80 to $3.95 a share in earnings on $1.6 billion to $1.65 billion of revenue.

The company cut its forecast because its competitors have introduced many new products and supported them with aggressive promotions. For example, Simmons Bedding Co. and Serta Inc. have both successfully launched memory-foam mattresses that directly compete with Tempur-Pedic’s products. Sealy Corp. also aims to increase its share of this market.

Tempur-Pedic’s long-term prospects are sound, and it’s well-positioned to increase its sales in fast-growing markets in Latin America and Asia. With the share price drop, it now trades at a low 9.5 times its forecast 2012 earnings.

However, for now, we still see the stock as a hold

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