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Risks Remain With Select Comfort After Beat-And-Raise Quarter

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Curtis Nagle of Bank of America maintained an Underperform rating on Select Comfort Corp. (NASDAQ: SCSS) although investors might not agree given the stock's 28 percent surge on Thursday.

Select Comfort reported a beat and raise quarter, but Nagle sees potential earnings risk throughout the rest of the year.

Specifically, Select Comfort will begin rolling out its new 360 bed line in the second quarter and the company has earned itself a poor track record for inconsistent performance. The analyst also believes flat pricing on the new models will limit ticket growth moving forward.

Nagle also believes the company has created for itself a greater reliance on driving comp traffic, which has been "very volatile" over the past few years. In fact, the company's own full year earnings guidance implies a growth rate of (19) percent to +11 percent for the rest of the year which "at least acknowledges the potential for volatility in coming quarters."

In addition, the analyst highlighted the "highly niche nature" of Select Comfort's core product offering which may limit consumer update.

Finally, Nagle noted that shares of Select Comfort are trading at 21x the midpoint of its guidance and 17x the analyst's 2018 earnings per share which implies that the aforementioned risks aren't priced into the stock.

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Latest Ratings for SCSS

Oct 2017Bank of AmericaMaintainsNeutral
Oct 2017Raymond JamesUpgradesMarket PerformOutperform
Jul 2017Bank of AmericaUpgradesUnderperformNeutral

View More Analyst Ratings for SCSS
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Posted-In: Bed Makers Beds Curtis Nagle Select ComfortAnalyst Color Analyst Ratings


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