Leggett & Platt Inc (LEG) Q1 2025 Earnings Call Highlights: Navigating Challenges with ...

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Wed, Apr 30, 2025, 1:09 AM 4 min read

Revenue: $1 billion, down 7% versus the first quarter of 2020.
Bedding Products Sales: Decreased 13% compared to first quarter 2024.
Specialized Products Sales: Declined 5% compared to first quarter 2024.
Furniture, Flooring and Textile Products Sales: Down 1% compared to first quarter 2024.
EBIT: $63 million; Adjusted EBIT: $67 million, up $3 million versus first quarter 2024 adjusted EBIT.
Earnings Per Share (EPS): $0.22; Adjusted EPS: $0.24, a 4% increase from first quarter 2024 adjusted EPS of $0.23.
Restructuring Costs: $6 million, with $5 million in cash costs and $1 million in noncash costs.
Operating Cash Flow: $7 million, an increase of $13 million versus first quarter 2024.
Total Debt: $1.9 billion, including $440 million of commercial paper outstanding.
Total Liquidity: $817 million, comprised of $413 million of cash on hand and $404 million in capacity under revolving credit facility.
Net Debt to Adjusted EBITDA: 3.77 times at quarter end.
2025 Sales Guidance: Expected to be $4.0 billion to $4.3 billion, down 2% to 9% versus 2024.
2025 Earnings Per Share Guidance: Expected to be $0.85 to $1.26; Adjusted EPS: $1 to $1.20.
2025 Adjusted EBIT Margin Range: Expected to be 6.4% to 6.8%.
2025 Cash from Operations: Expected to be $275 million to $325 million.

Warning! GuruFocus has detected 5 Warning Signs with LEG.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Leggett & Platt Inc (NYSE:LEG) reported better-than-anticipated first quarter earnings, attributed to successful restructuring and operational efficiency improvements.
The company made significant progress on its restructuring plan, including divesting a small U.S. machinery business and launching Phase 2 of consolidation efforts in flooring products.
Leggett & Platt Inc (NYSE:LEG) signed an agreement to sell its aerospace business, expecting after-tax cash proceeds of approximately $240 million, contributing to a more focused portfolio.
The company is well-positioned to benefit from steel tariffs, which are leading to expanded metal margins and higher demand for its steel rod and drawn wire operations.
Leggett & Platt Inc (NYSE:LEG) maintained its sales and adjusted earnings guidance for 2025, with expectations of increased U.S. rod and wire pricing due to steel-related tariff benefits.

Negative Points

First quarter sales were down 7% compared to the first quarter of 2020, due to weak demand in residential end markets and soft demand in automotive and hydraulic cylinders.
Sales in the Bedding Products segment decreased by 13%, with continued demand softness in mattresses and adjustable bases.
The company faces challenges from tariffs, which could drive inflation, hurt consumer confidence, and pressure consumer demand.
Leggett & Platt Inc (NYSE:LEG) experienced a decline in bedding volume, attributed to restructuring-related sales attrition and increased competition from imported finished mattresses.
The company's net debt to trailing 12-month adjusted EBITDA increased slightly to 3.77 times at the end of the first quarter, reflecting the normal seasonality of working capital investments.

Q & A Highlights

Q: Can you discuss the benefits of the restructuring plan and any potential upside for the business? A: Karl Glassman, CEO, explained that the restructuring benefits are expected to continue throughout the year, with significant upside anticipated when market demand recovers. Cassie Branscum, VP of Investor Relations, noted that the first quarter saw about $14 million in EBIT benefit, and they are on track to realize 55% to 60% of the expected benefits for 2025. Ben Burns, CFO, added that real estate sales related to restructuring are progressing well, with several properties under contract.

Q: How are tariffs impacting consumer behavior and channel inventories, particularly in the bedding business? A: Karl Glassman, CEO, stated that while they expected some pull forward due to tariffs, they couldn't identify significant changes in consumer behavior or channel inventories. J. Tyson Hagale, President of Bedding Products, added that imported components and finished mattresses might have been brought in ahead of tariffs, affecting market estimates for consumption.

Q: What is the expected impact of the aerospace business divestiture on the company's financials? A: Ben Burns, CFO, mentioned that while they won't provide specific guidance until the sale closes, the first quarter sales for aerospace were $53 million with an EBIT of $7 million. The transaction is expected to close by the end of the third quarter, pending approvals from U.K. and French authorities.

Q: Can you provide an update on the company's capital allocation strategy, particularly regarding debt reduction and potential share repurchases? A: Ben Burns, CFO, indicated that they plan to use cash from operations, real estate sales, and the aerospace divestiture to reduce debt, potentially eliminating commercial paper by year-end. The long-term leverage target is 2x debt-to-EBITDA, and they may consider share repurchases if leverage is reduced significantly.

Q: How are tariffs affecting the automotive business, and what is the company's strategy to mitigate these impacts? A: Samuel Smith, President of Furniture, Flooring & Textile Products, explained that their automotive business is regionally focused, with products made in North America being USMCA compliant. While direct impacts are minimal, indirect effects could arise from price inflation reducing car production and sales. However, current OEM signals remain stable.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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