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    LEGGETT & PLATT (LEG)

    Q3 2024 Earnings Summary

    Reported on Jan 7, 2025 (After Market Close)
    Pre-Earnings Price$12.66Last close (Oct 29, 2024)
    Post-Earnings Price$12.79Open (Oct 30, 2024)
    Price Change
    $0.13(+1.03%)
    • ComfortCore products are performing in line with or slightly ahead of market trends, indicating strength in this product line and successful shift from Open Coil to ComfortCore.
    • Leggett & Platt has made early progress on debt reduction, reducing total debt by $124 million in the quarter, leading to a $5 million reduction in interest expense for every $100 million in debt reduced.
    • The company's steel mill is incredibly efficient, and running it at full capacity helps maintain or lower scrap and conversion costs, enhancing profitability.
    • Margins in the Bedding Products segment are down about 200 basis points, primarily due to unfavorable sales mix and lower volumes, impacting profitability.
    • Home Furniture sales and volumes have taken a notable step down sequentially, affected by industry disruptions like retailer bankruptcies and continued softening demand.
    • Automotive volume is down 9%, with uncertainties about future recovery, indicating potential ongoing challenges in this segment.
    1. Margin Expectations
      Q: What's the outlook for margins in each segment this year?
      A: In Bedding, margins are expected to be down about 200 basis points due to unfavorable sales mix. Specialized Products margins are anticipated to be down slightly. Furniture, Flooring, and Textile margins are projected to be flat.

    2. CapEx Guidance and Investments
      Q: Why is CapEx spend increasing in Q4, and what projects are planned?
      A: CapEx is expected to be around $40 million in Q4, focused on maintenance for the rod mill, growth initiatives in Bedding, and launching new Automotive programs. Investments include a product line refresh in Bedding requiring new equipment, and efficiency improvements in U.S. Spring operations.

    3. Automotive Segment Challenges
      Q: How are delays in new Automotive programs affecting performance, and what is the company doing to mitigate this?
      A: New program launches have been delayed due to industry factors like slow EV adoption and affordability issues, impacting top-line by about 40% of expected growth. To mitigate this, the company is resizing headcount, implementing automation, relocating programs closer to customers, focusing on raw material cost savings, and continuing routine VA/VE work to improve margins.

    4. Steel Rod Business Strategy
      Q: Is the company changing pricing strategy to drive higher trade rod volumes?
      A: The company is not lowering prices but is focusing on keeping the rod mill operating at full capacity by increasing trade rod sales, despite lower margins in this segment. This strategy helps maintain or lower scrap and conversion costs and retains a skilled workforce.

    5. Bedding Volume Decline and Impact of Imports
      Q: How is the Bedding segment performing, considering consumption and imports?
      A: Overall Bedding consumption was flat year-over-year, but domestic production was down high single digits due to increased imports. The U.S. market is expected to decline in Q4, with domestic production impacted more than overall consumption.

    6. Debt Paydown and Interest Savings
      Q: What are the expected interest savings from debt paydown?
      A: For every $100 million reduction in debt, the company expects to reduce expenses by about $5 million.

    7. EBITDA Margins in Specialized Products Segment
      Q: How do the businesses in the Specialized Products segment rank in terms of EBITDA margins?
      A: The ranking from highest to lowest EBITDA margins is: Automotive, Aerospace, then Hydraulics.

    8. Home Furniture Segment Decline
      Q: What's causing the decline in the Home Furniture segment?
      A: The industry is challenged due to retail bankruptcies and a soft market, leading to decreased sales and volumes. There's also a comp issue due to inventory adjustments and shifts in production locations.

    9. Impact of Upcoming Election on Consumer Behavior
      Q: How is the upcoming election affecting consumer behavior and sales?
      A: Consumers are distracted ahead of the election, leading to softness in sales. Higher advertising costs and customers watching inventories are also impacting demand.

    10. ComfortCore Performance
      Q: How is the ComfortCore product performing compared to the market?
      A: ComfortCore is performing slightly better than the market due to a shift from Open Coil to ComfortCore and favorable customer performance.

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