After looking at downgrades this morning and then after the stocks that hit 52-week lows, Sealy Corp. (NYSE:ZZ) showed up on the list. Sealy saw its stock become broken last week after its $0.22 EPS was well short of $0.32 estimates. It seems that soft housing is the obvious, but lower pricing power is also a factor here. Its share buyback plan isn’t doing much to keep it off of lows either. Banc of America’s downgrade from a Buy to Neutral is the extra catalyst for selling today. The 52-week low of $13.000 from Friday was taken out today, and while shares are back within a few pennies of that level it appears that $12.52 was the new low put in today. After this came public in early 2006 shares did drop down to $12.00 before coming back up to $18.00.
Select Comfort (NASDAQ:SCSS) shares are up almost 1% today, although it hasn’t done much better in general. At $14.55, shares are close to the bottom of its $13.85 to $25.25 trading range over the last 52-weeks. The standout is Tempur-Pedic (NYSE:TPX). Its shares are down marginally today at $38.91, but its 52-week trading range is $17.12 to $37.87.
These companies are all profitable and are expected to remain that way. Market caps are all somewhat low: Sealy $1.4 Billion; Tempur-Pedic $2.9 Billion; Select Comfort $637 million. These all have straight forward business models where competitors might not want to come into an established industry, and in the past each one of these have been thought of that under the right conditions could become targets of private equity. Those thoughts are probably long gone for the current buyout climate. But if they get too cheap it may be too hard not to look at.
Jon C. Ogg
October 8, 2007