Sealy Loses Its Spring ZZ
Shares of Sealy Corporation, the largest bedding manufacturer in the world, have fallen in almost a straight line since the companyÂs IPO in April. The company has traded as high as $18.20 and as low as $12.95. The stock trades at $13.10 at this point, which is quite a drop in a very short time.
The companyÂs debt was recently upgraded by S&P and MoodyÂs and Banc of America Securities initiated coverage with a buy. ThatÂs a lot of support for a company sitting at its lows.
What happened? Sealy recently announced earnings for the quarter ending February 26, 2006. Revenue rose to $395.7 million from $359 million, or 10.2%. Operating income was $56.7 million from $53.2 million, up 6.6%.
Since the end of the November 27, 2005 quarter, accoureceivableable have risen to $204 million from $174.5 million. Payables have dropped to $110.4 million from $119.6 million.
The company IPO raised $299.5 million and a good deal of these proceeds went to redeem Senior Subordinated PIK Notes and some of the company's 8.25% Senior Subordinated Notes. So, the company's balance sheet improved.
The company has marquee brands: Sealy, Sealy Posturepedic, and Stearns & Foster.
Sealy has very few major negatives. The cost of some of the foam used in its bedding is impacted by oil prices, but the company has been able to raise prices to consumers to offset this. The company is not a huge growth engine, but it does market premium brands.
With the stock down 28% from the April IPO, these shares are a bargain.
Douglas A. McIntyre
The companyÂs debt was recently upgraded by S&P and MoodyÂs and Banc of America Securities initiated coverage with a buy. ThatÂs a lot of support for a company sitting at its lows.
What happened? Sealy recently announced earnings for the quarter ending February 26, 2006. Revenue rose to $395.7 million from $359 million, or 10.2%. Operating income was $56.7 million from $53.2 million, up 6.6%.
Since the end of the November 27, 2005 quarter, accoureceivableable have risen to $204 million from $174.5 million. Payables have dropped to $110.4 million from $119.6 million.
The company IPO raised $299.5 million and a good deal of these proceeds went to redeem Senior Subordinated PIK Notes and some of the company's 8.25% Senior Subordinated Notes. So, the company's balance sheet improved.
The company has marquee brands: Sealy, Sealy Posturepedic, and Stearns & Foster.
Sealy has very few major negatives. The cost of some of the foam used in its bedding is impacted by oil prices, but the company has been able to raise prices to consumers to offset this. The company is not a huge growth engine, but it does market premium brands.
With the stock down 28% from the April IPO, these shares are a bargain.
Douglas A. McIntyre
posted by douglas mcintyre at 6:15 AM
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