Tempur-Pedic Shares Popped: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of space-age mattress maker Tempur-Pedic (NYS: TPX) were looking pretty comfortable today despite the choppy market, as they rose as much as 13% on heavier-than-average volume.

So what: If I were to write a recipe book for cooking up stock market gains, the very first mixture would be two parts current-quarter expectation toppers and two parts raised guidance. It's almost guaranteed to do the trick. For Tempur-Pedic, second-quarter sales of $342 million were up 30% from last year, while earnings per share of $0.76 jumped 65%. Analysts were expecting $0.67 in EPS on $322 million in revenue.

As for guidance, the company bumped its full-year outlook to revenue and per-share profit of $1.39 billion and $3.11 at the respective midpoints. Wall Street estimates had been set at $1.35 billion in revenue and $2.95 in EPS.

As if all of that wasn't enough, Tempur-Pedic also sprinkled a little powdered sugar on top of this tasty quarterly concoction by unveiling a new $200 million share-repurchase program.

Now what: Investors may be happy today, but it's not like they didn't already have a high opinion of Tempur-Pedic. Following today's move, the stock now trades at roughly 24 times management's new earnings guidance. If the company can maintain recent growth rates, that could turn out to be a pretty reasonable price. However, if growth levels off -- and it's expected to -- the best we may be able to say is that this is a fair price for the stock.

Want to keep up to date on Tempur-Pedic?Add it to your watchlist.

At the time thisarticle was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferdoes not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter@KoppTheFoolorFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.