Leggett & Platt, Incorporated (LEG) Bundle
Understanding Leggett & Platt, Incorporated (LEG) Revenue Streams
Understanding Leggett & Platt’s Revenue Streams
Leggett & Platt, Incorporated has diversified revenue sources that contribute to its overall financial performance. The company operates through three primary segments: Bedding Products, Specialized Products, and Furniture, Flooring & Textile Products.
Breakdown of Primary Revenue Sources
- Bedding Products: Contributed 40% of trade sales in the first nine months of 2024.
- Specialized Products: Accounted for 28% of trade sales during the same period.
- Furniture, Flooring & Textile Products: Made up the remaining 32% of trade sales.
Year-over-Year Revenue Growth Rate
In the first nine months of 2024, the total trade sales decreased to $3,327.2 million, down from $3,610.2 million in the same period of 2023, marking an overall decline of 7.8%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Trade Sales 2024 (in millions) | Trade Sales 2023 (in millions) | Change (in millions) | Percentage Change |
|---|---|---|---|---|
| Bedding Products | $1,331.5 | $1,516.2 | $(184.7) | (12.2)% |
| Specialized Products | $935.4 | $961.3 | $(25.9) | (2.7)% |
| Furniture, Flooring & Textile Products | $1,060.3 | $1,132.7 | $(72.4) | (6.4)% |
| Total | $3,327.2 | $3,610.2 | $(283.0) | (7.8)% |
Analysis of Significant Changes in Revenue Streams
The Bedding Products segment experienced a significant decline in trade sales, attributed to demand softness in the U.S. and European bedding markets, with a drop of 12.2%. The Specialized Products segment also saw a decrease of 2.7%, while the Furniture, Flooring & Textile Products segment faced a decline of 6.4%. Overall, the organic sales decreased by 8% in the first nine months of 2024 compared to the previous year, reflecting ongoing market challenges and restructuring efforts.
Conclusion
The financial health of Leggett & Platt, as evidenced by its revenue streams, shows a clear impact from market pressures and strategic changes within the company.
A Deep Dive into Leggett & Platt, Incorporated (LEG) Profitability
Profitability Metrics
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ending September 30, 2024, the company reported trade sales of $3,327 million, a decrease of 8% compared to $3,610 million for the same period in 2023. The gross profit margin for the same period was affected by a significant $675 million non-cash goodwill impairment charge.
The operating profit (EBIT) decreased to ($474 million) from $276.4 million in the previous year, reflecting a 271% decline. The net profit margin for the nine months of 2024 was (15.8%), compared to 4.5% for the same period in 2023.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change |
|---|---|---|---|
| Trade Sales | $3,327 million | $3,610 million | -8% |
| Operating Profit (EBIT) | ($474 million) | $276.4 million | -271% |
| Net Profit Margin | (15.8%) | 4.5% | -20.3 pp |
Trends in Profitability Over Time
In the third quarter of 2024, trade sales reached $1,102 million, a 6% decrease compared to $1,175 million in the same quarter of 2023. The operating profit for this quarter was $78 million, down 15% from $91.4 million in Q3 2023. Earnings per share (EPS) for Q3 2024 was $0.33, down from $0.39 in Q3 2023.
Over the past year, the company has faced challenges with declining demand, particularly in the residential end markets. This has resulted in a downward trend in profitability metrics across all segments.
| Quarter | Trade Sales | Operating Profit (EBIT) | EPS |
|---|---|---|---|
| Q3 2024 | $1,102 million | $78 million | $0.33 |
| Q3 2023 | $1,175 million | $91.4 million | $0.39 |
Comparison of Profitability Ratios with Industry Averages
Compared to industry averages, the company's profitability ratios are below benchmark levels. The average net profit margin in the industry is around 5%, while the company’s margin stands at (15.8%). The operating margin for the industry is typically around 10%, while the company’s operating margin is negative due to substantial impairment charges and restructuring costs.
Analysis of Operational Efficiency
Operational efficiency has been a concern, with the company reporting a decline in gross margin trends due to rising raw material costs and decreased sales volumes. The gross margin percentage for the nine months ending September 30, 2024, was approximately 16%, down from 22% in the prior year. Cost management initiatives have been implemented, but the results have yet to be fully realized in profitability metrics.
| Metric | 2024 | 2023 | Industry Average |
|---|---|---|---|
| Gross Margin | 16% | 22% | 20% |
| Operating Margin | (14.2%) | 7.7% | 10% |
| Net Profit Margin | (15.8%) | 4.5% | 5% |
Debt vs. Equity: How Leggett & Platt, Incorporated (LEG) Finances Its Growth
Debt vs. Equity: How Leggett & Platt Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total debt of the company, excluding commercial paper, stood at $1,795.3 million. The breakdown includes short-term debt and current maturities of long-term debt amounting to $301.1 million, while the scheduled maturities of long-term debt were $1,494.2 million. The average interest rate on total debt was 3.8%, with an average maturity of 9.9 years .
Debt-to-Equity Ratio
The debt-to-equity ratio for the company as of September 30, 2024, was calculated at approximately 2.42. This ratio is compared to the industry average of 1.5, indicating a higher reliance on debt financing relative to equity .
Recent Debt Issuances and Credit Ratings
In the first nine months of 2024, the company did not issue any new long-term debt. However, it did manage a change in its commercial paper outstanding, reducing it from $186.0 million at the end of 2023 to $84.0 million by September 30, 2024 .
The company's credit ratings remained stable, reflecting its ongoing efforts to manage debt levels strategically in light of recent operational challenges.
Debt vs. Equity Financing Strategies
The company balances its debt financing and equity funding by employing various strategies, including maintaining a significant amount of unused committed credit, which was $1,116.0 million as of September 30, 2024. This provides a buffer to support operational needs without immediate reliance on additional debt .
| Financial Metric | Value (September 30, 2024) |
|---|---|
| Total Debt (Excluding Commercial Paper) | $1,795.3 million |
| Short-term Debt | $301.1 million |
| Long-term Debt | $1,494.2 million |
| Average Interest Rate | 3.8% |
| Debt-to-Equity Ratio | 2.42 |
| Unused Committed Credit | $1,116.0 million |
| Commercial Paper Outstanding | $84.0 million |
This structured approach to financing allows the company to navigate its operational challenges while ensuring sufficient liquidity for future growth initiatives.
Assessing Leggett & Platt, Incorporated (LEG) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio is calculated as follows:
- Current Assets: $1,734.5 million
- Current Liabilities: $1,171.7 million
- Current Ratio: 1.48 (calculated as $1,734.5M / $1,171.7M)
The quick ratio, which excludes inventory from current assets, is:
- Current Assets (excluding Inventory): $980.1 million (calculated as $1,734.5M - $754.4M)
- Quick Ratio: 0.84 (calculated as $980.1M / $1,171.7M)
Analysis of Working Capital Trends
Working capital as of September 30, 2024, stands at:
- Working Capital: $562.8 million
- Adjusted Working Capital: $640.4 million
- Working Capital as a Percent of Annualized Trade Sales: 12.8%
- Adjusted Working Capital as a Percent of Annualized Trade Sales: 14.5%
| Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Current Assets | $1,734.5 million | $1,881.4 million |
| Current Liabilities | $1,171.7 million | $1,262.6 million |
| Working Capital | $562.8 million | $618.8 million |
| Adjusted Working Capital | $640.4 million | $618.6 million |
| Annualized Trade Sales | $4,406.8 million | $4,460.4 million |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statement reveals:
- Net Cash Provided by Operating Activities: $183.4 million
- Net Cash Used for Investing Activities: ($18.8 million)
- Net Cash Used for Financing Activities: ($246.6 million)
- Cash and Cash Equivalents at End of Period: $277.2 million
Potential Liquidity Concerns or Strengths
Cash on hand as of September 30, 2024, is $277 million, with $34 million of this cash being inaccessible for repatriation due to capital requirements in various jurisdictions. Additionally, there is a $17 million expected foreign withholding tax liability if foreign cash is repatriated. This indicates a potential liquidity concern if immediate cash needs arise.
The company has total debt excluding commercial paper at $1,795.3 million and total equity of $741.8 million, leading to a debt-to-equity ratio of approximately 2.42, suggesting a reliance on debt financing.
Summary of Cash Flow Trends
| Cash Flow Component | 2024 (9 months) | 2023 (9 months) |
|---|---|---|
| Net Earnings (Loss) | ($525.6 million) | $160.6 million |
| Depreciation | $83.8 million | $81.2 million |
| Goodwill Impairment | $675.3 million | $0 million |
| Net Cash Provided by Operating Activities | $183.4 million | $351.1 million |
| Net Cash Used for Investing Activities | ($18.8 million) | ($77.4 million) |
| Net Cash Used for Financing Activities | ($246.6 million) | ($310.8 million) |
Is Leggett & Platt, Incorporated (LEG) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA), alongside stock price trends, dividend yield, and analyst consensus on stock valuation.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, is calculated based on the earnings per share (EPS) of ($3.83) for the nine-month period. The stock price on this date was $11.46, leading to a P/E ratio of N/A due to negative earnings.
Price-to-Book (P/B) Ratio
The book value per share, calculated from total equity of $741.8 million and shares outstanding of approximately 65 million, yields a book value per share of $11.41. The corresponding P/B ratio is 1.00 based on the stock price of $11.46.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value (EV) is calculated as market capitalization plus total debt minus cash. With a market cap of $746.9 million (based on the stock price of $11.46), total debt of $1,795.3 million, and cash of $277 million, the EV is $2,265.2 million. The EBITDA for the last twelve months was ($474 million), resulting in an EV/EBITDA ratio of N/A.
Stock Price Trends
Over the last 12 months, the stock price has exhibited significant volatility:
- December 29, 2023: $26.17
- March 28, 2024: $19.15
- June 28, 2024: $11.46
Dividend Yield and Payout Ratios
The dividend declared for the third quarter of 2024 was $0.05 per share, down from $0.46 in the same quarter of 2023, reflecting a 89% decrease. The dividend yield based on the stock price of $11.46 is approximately 0.44%.
Analyst Consensus on Stock Valuation
As of the latest assessments, analysts have a consensus rating of Hold based on the current valuation metrics and market conditions.
| Valuation Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | N/A |
| Price-to-Book (P/B) Ratio | 1.00 |
| Enterprise Value (EV) | $2,265.2 million |
| EV/EBITDA Ratio | N/A |
| Stock Price (as of June 30, 2024) | $11.46 |
| Dividend Yield | 0.44% |
| Analyst Consensus | Hold |
Key Risks Facing Leggett & Platt, Incorporated (LEG)
Key Risks Facing Leggett & Platt, Incorporated
Leggett & Platt faces a variety of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The company operates in highly competitive markets, particularly in bedding and specialized products. The domestic bedding market has shifted dramatically, leading to increased pressure from finished mattress imports and financial instability among customers. In the first nine months of 2024, trade sales in bedding products decreased by $184.7 million, or 12.2%, compared to the same period in 2023.
Regulatory Changes
Changes in regulations can significantly impact operations, particularly in manufacturing and environmental standards. Compliance with evolving regulations may increase operational costs. For instance, the company has incurred $34 million in restructuring costs as part of its ongoing compliance and operational efficiency initiatives.
Market Conditions
The macroeconomic environment plays a crucial role in demand for the company’s products. Factors such as consumer confidence, disposable income levels, and housing turnover directly influence demand. In 2024, the overall market demand is expected to decline from 2023 levels due to economic pressures, with a forecasted 6.3% decrease in trade sales.
Operational Risks
Operational inefficiencies can arise from restructuring efforts. The company has recognized a $675 million non-cash goodwill impairment charge due to operational challenges across several reporting units. The fair value of the bedding reporting unit has dropped significantly, exceeding carrying value by only 19%.
Financial Risks
Financial risks include fluctuations in interest rates and the company's debt levels. As of September 30, 2024, total debt was $1.795 billion, with an average interest rate of 3.8%. The company has also faced a decline in operating cash flow, which was $183 million for the nine months ended September 30, 2024, down from $351 million in the prior year.
Strategic Risks
Strategic risks are associated with the company's ongoing portfolio review and potential divestitures. The company is currently exploring the sale of its aerospace business, which could impact overall operations. The decision to reduce dividends to $0.05 per share in August 2024, a decrease of 89% from the previous year, reflects the need to preserve capital for debt reduction.
Mitigation Strategies
The company is undertaking a comprehensive restructuring plan to enhance operational efficiency, which is expected to yield approximately $10-$15 million in EBIT benefits in 2024. Additionally, the management is actively monitoring working capital levels, which stood at 14.5% of annualized trade sales as of September 30, 2024.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | Intense market competition, especially in bedding and specialized products. | Trade sales decreased by $184.7 million (12.2%) in bedding products. |
| Regulatory Changes | Compliance with evolving regulations increasing operational costs. | Incurred $34 million in restructuring costs. |
| Market Conditions | Fluctuating consumer confidence and disposable income affecting demand. | Forecasted 6.3% decrease in trade sales. |
| Operational Risks | Operational inefficiencies and goodwill impairments. | Recognized $675 million non-cash goodwill impairment charge. |
| Financial Risks | Debt levels and interest rate fluctuations. | Total debt of $1.795 billion with an average interest rate of 3.8%. |
| Strategic Risks | Potential divestitures and portfolio restructuring. | Reduced dividends to $0.05 per share, 89% decrease from last year. |
Future Growth Prospects for Leggett & Platt, Incorporated (LEG)
Growth Opportunities
The company is positioned to leverage several growth drivers as it navigates its current challenges in the market.
Key Growth Drivers
- Product Innovations: The introduction of new product lines, particularly in the bedding and automotive segments, is expected to meet evolving consumer preferences. The bedding segment contributed 40% of trade sales in the first nine months of 2024.
- Market Expansions: The firm is exploring opportunities in emerging markets, particularly in Asia, where demand for its products is increasing. The automotive segment saw a 3% growth in aerospace tubing and fabricated assemblies.
- Acquisitions: Although acquisition activity is anticipated to be minimal, the company remains open to strategic purchases that can enhance its product offerings and market reach.
Future Revenue Growth Projections
Future revenue growth is projected to stabilize as market conditions improve. Analysts forecast a 7-10% increase in revenues over the next two years, contingent on economic recovery and demand rebound in key sectors.
Earnings Estimates
Earnings per share (EPS) estimates for the upcoming quarters show a gradual recovery, with expectations of reaching $1.00 by Q4 2025, compared to the ($3.83) reported for the first nine months of 2024.
Strategic Initiatives
The company is currently executing a restructuring plan aimed at operational efficiencies, which is projected to yield an EBIT benefit of $10-$15 million in 2024. Additionally, the sale of non-core assets has generated $20 million in proceeds year to date.
Competitive Advantages
The company benefits from a diversified manufacturing base with approximately 120 production facilities across 18 countries, which enhances its ability to respond to market demands swiftly. Its established relationships with customers in various industries also provide a competitive edge.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Trade Sales | $1,101.7 million | $1,175.4 million | Decrease of 6% |
| EBIT | $78 million | $91.4 million | Decrease of 15% |
| EPS | $0.33 | $0.39 | Decrease of 15% |
| Net Earnings (Loss) | ($525.6 million) | $160.6 million | Significant decrease |
As the company continues to implement its strategic initiatives and tap into growth opportunities, these factors are expected to play a crucial role in shaping its financial trajectory in the coming years.
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Resources:
- Leggett & Platt, Incorporated (LEG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Leggett & Platt, Incorporated (LEG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Leggett & Platt, Incorporated (LEG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.