Why Tempur Sealy Shares Collapsed

Why Tempur Sealy Shares Collapsed

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 Tempur Sealy International were getting squashed today, falling as much as 13% after delivering a disappointing second-quarter earnings report.

So what: The recently merged mattress maker said revenue doubled, thanks to the addition of Sealy, hitting $660.6 million, but that missed the Street's forecast at $662.8 million. Earnings per share also came up short at $0.36, against expectations of $0.40. Even worse, the company lowered its full-year EPS guidance to $2.25-$2.40 from $2.43-$2.45, as management said it's "taking longer than expected" to return the company to growth following the acquisition. Sales from continuing operations dropped 4.9% in the quarter.

Now what: The acquisition of Sealy was supposed to re-energize the company, but management still sees sales at the legacy Tempur North America falling 5% to 10%. The mattress industry may be due for further consolidation following the merger, as several players are competing for what appears to be a shrinking pie. Tempur-Pedic once dominated the market with its Memoryfoam mattress, but rivals have caught up in recent quarters. I'd approach the entire industry with caution, especially Tempur Sealy, which has now missed estimates several times of late.

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The article Why Tempur Sealy Shares Collapsed originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Tempur-Pedic International. 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. The Motley Fool has a disclosure policy.

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Originally published