3 Best Mattress Stocks to Add to Your Portfolio The continuing expansion of healthcare facilities and growing residential demand for personalized and advanced mattresses are driving the mattress industry's growth. So, we think prominent players in this space, Tempur...
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The continuing expansion of healthcare facilities and growing residential demand for personalized and advanced mattresses are driving the mattress industry's growth. So, we think prominent players in this space, Tempur Sealy (TPX), Sleep Number (SNBR), Culp (CULP), could deliver solid returns in the coming months. Read on.
The increasing construction of residential complexes, continuing expansion of healthcare facilities, rising disposable income, and change in consumer preferences are fueling the growth of the mattress market. The global mattress market is expected to reach $17.48 billion by 2025, registering an 8% CAGR.
Furthermore, the availability of personalized mattresses, with alternative materials for customers with back and posture-related problems and/or who need an upgraded sleeping solution, is propelling the market's growth. The U.S. memory foam mattress market is projected to reach $17.69 billion by 2026, growing at a 6.35% CAGR. Accessibility of bedding products both in-store and online is also powering the sale of mattresses.
Therefore, we think it could be wise to bet on quality mattress stocks Tempur Sealy International, Inc. (TPX), Sleep Number Corporation (SNBR), Culp, Inc. (CULP). These names are expected to deliver significant returns in the near term based on their strong market positions and solid financials.
Tempur Sealy International, Inc. (TPX)
TPX in Lexington, Ky., is a bedding provider that develops, manufactures, and markets mattresses, adjustable bases, pillows, and other sleep and relaxation products. The company offers its products under Tempur, Tempur-Pedic, Cocoon by Sealy, Sealy, and Stearns & Foster brands. It operates through two segments: North America and International. The company sells its products through third-party retailers, company-owned stores, and e-commerce.
In August, TPX entered a three-year strategic partnership with Mattress Firm, the leading mattress specialty retailer. Through this partnership, the companies should be able to provide a quality collection to customers and better address their needs.
TPX's net sales for the second quarter, ended June 30, 2021, increased 75.8% year-over-year to $1.17 billion. The company's gross profit grew 94.9% from its year-ago value to $518.2 million. Its operating income rose 318.2% from the prior-year quarter to $223.3 million. Also, the company's EPS increased 527.3% year-over-year to $0.69.
Analysts expect TPX's revenue to increase 36.3% year-over-year to $5.01 billion in fiscal 2021. Also, it has an impressive earnings surprise history; it beat the consensus EPS in each of the trailing four quarters. The company's EPS is expected to increase 69.1% in the current year. Furthermore, the stock has gained 116.5% in price over the past year.
TPX's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B grade for Sentiment, Growth, and Quality. We've also graded TPX for Value, Stability, and Momentum. Click here to access all of TPX's ratings. TPX is ranked #11 of 61 stocks in the B-rated Home Improvement & Goods industry.
Sleep Number Corporation (SNBR)
SNBR is a sleep solution provider that designs, manufactures, and markets mattresses, bedding, pillows, furniture, and other bed accessories. The Minneapolis, Minn.-based company offers its products under the Sleep Number, FlexFit, SleepIQ Kids k2, and other brand names. In addition, it provides a variety of temperature-balancing products, including the DualTemp layer. SNBR operates in 602 retail stores in 50 states.
In August, SNBR launched "My Sleep Health," its newest Sleep Number 360 smart bed. This advanced technology feature is designed to give users a weekly view of sleep health trends with actionable and personalized recommendations based on sleep duration, efficiency, and timing. The company could potentially witness significant growth in sales with this product launch.
During its second fiscal quarter, ended July 3, 2021, SNBR's net sales increased 70% year-over-year to $484.32 million. The company's gross profit grew 79.7% from its year-ago value to $292.85 million. Its operating income came in at $29.72 million, versus a $12.13 million operating loss in the prior-year quarter. Also, the company's net income amounted to $22.25 million, compared to a $12.63 million net loss in the second quarter of 2020.
SNBR's revenue is expected to increase 22.7% year-over-year to $2.28 billion in its fiscal year 2021. The company has surpassed the consensus EPS in three of the trailing four quarters. Also, its EPS is expected to increase by 45.9% in the current year. The stock has returned 41.7% over the past year.
SNBR's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Quality, and a B for Value.
In addition to the POWR Rating grades I've just highlighted, one can see SNBR's ratings for Stability, Growth, Sentiment, and Momentum here. SNBR is ranked #18 in the Home Improvement & Goods industry.
Culp, Inc. (CULP)
CULP is a global supplier of a wide range of mattress and upholstery fabrics for furniture. The company operates in two segments—Mattress Fabrics; and Upholstery Fabrics. In addition, the High Point, N.C.-based concern manufactures sewn covers, sewn kits, and other bedding products. CULP markets a range of fabrics, including fabrics produced at its manufacturing facilities and fabrics produced by other suppliers.
CULP's net sales increased 28.8% year-over-year to $83.05 million for its fiscal first quarter ended August 1, 2021. The company's gross profit grew 26.2% from its year-ago value to $12.5 million. Its operating income rose 76.2% from the prior-year quarter to $3.32 million. Also, the company's net income came in at $2.25 million, versus a $2.73 million net loss in its fiscal first quarter of 2020.
For its fiscal year 2022, analysts expect CULP's revenue to increase 10.4% year-over-year to $330.78 million. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The company's EPS is estimated to increase 23.7% in the current year. The stock has gained 3.6% in price over the past month.
It's no surprise that CULP has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Momentum, Value, and Growth.
Click here to see the additional POWR Ratings for CULP (Stability, Quality, and Sentiment). In the A-rated Industrial – Textiles, CULP is ranked #3 of 5 stocks.
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TPX shares fell $47.56 (-100.00%) in premarket trading Wednesday. Year-to-date, TPX has gained 77.21%, versus a 23.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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