Piper Jaffray Lowers Tempur Sealy Price Target, Says Mattress Firm Gained Market Share With 'Aggressive' Promotions

Increased competition from Mattress Firm could be weighing on Tempur Sealy International Inc TPX, according to Piper Jaffray. 

The Analyst 

Piper Jaffray analyst Peter Keith maintains an Overweight rating on Tempur Sealy but lowered the price target from $75 to $66.

The Thesis

Mattress Firm gained market share against Tempur Sealy with an "aggressive" President's Day promotion, Keith said in a Sunday note. The analyst said he expects more promotions for Memorial Day.

Although Piper Jaffray expects Tempur Sealy's fundamentals to improve in the second half of 2018 and in 2019, the firm lowered its first-quarter EBITDA estimates. 

"But we will be monitoring industry trends closely over the coming months to see if our 2018 EBITDA needs to be reduced," Keith said. 

Tempur Sealy’s adapt launch also appears delayed, with a February survey showing that 63 percent of retailers expect a delay —which could ultimately impact second quarter numbers.

"While we are not yet ready to deem Q2 TPX sales at risk, this is certainly a situation that warrants monitoring," the analyst said. 

Piper Jaffray is incrementally less positive on the mattress maker, but is maintaining an Overweight rating due to a discounted valuation and a decent medium-term outlook, Keith said.

"While the situation with Mattress Firm remains uncertain, Tempur Sealy has recently hinted that a reconciliation at some point would make sense." 

Price Action

Tempur Sealy shares were down 4.4 percent at $49.23 at the time of publication Monday afternoon.

Related Links:

Tempur Sealy Benefits From Mattress Firm's Woes, Wedbush Says

Cuddle Up To A Position In Tempur Sealy Shares, Says Piper Jaffray

Photo courtesy of Tempur Sealy. 

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