William Blair & Company Initiates Coverage of Tempur-Pedic International Inc. With Outperform Rating.
Analyst Jack Murphy estimated that the company, which manufactures, markets, and distributes premium mattresses and pillows made of the proprietary pressure-relieving TEMPUR material, would earn $1.74 per share in 2007 and $2.12 per share in 2008.
"We believe Tempur-Pedic's differentiated product, growing brand awareness, and strong relationships with retailers and distributors support continued growth in the company's 8% share of the $7 billion U.S. bedding industry and growth from a midsingle-digit international market share," Murphy said.
"We expect margins to expand by approximately 300 basis points over the long term, driven by production efficiency, distribution gains, sourcing, and leverage of fixed expenses. Free cash flow and return on invested capital of 25% are set to improve following the completion of a third manufacturing facility in early 2007," he added. "We believe the company should enjoy several years of profitable growth. We expect long-term sales growth of 12% to be driven largely by wholesale sales to retailers. Assuming scale-driven margin gains and share repurchases, our long-term EPS growth estimate is 15%-16%."
William Blair & Company, L.L.C. has received compensation for investment banking services from the company within the past 12 months, or expects to receive or intends to seek compensation for investment banking services in the next 3 months.
William Blair & Company, L.L.C. (www.williamblair.com) is a Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients' interests first and foremost. We place a high value on the enduring nature of our client relationships, the quality of our products and services, and the continuity and integrity of our people.
For important disclosures and information regarding the firm's rating system, valuation methods and potential conflicts of interest, please visit: http://www.williamblair.com/Pages/news_story_dept.asp?uid=1284&depID=4
Additional information is available upon request.
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|Article Type:||Company overview|
|Date:||Oct 31, 2007|
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