Why Tempur-Pedic Got Put to Sleep in 2012

The year is nearing its end, and now's a good opportunity to look at what happened throughout 2012 to the stocks you follow. If you know the important things that a company achieved, as well as any challenges it failed to overcome, then you can make a better decision about whether it really deserves a spot in your portfolio.

Today, I'll look at Tempur-Pedic . As a premium mattress maker, Tempur-Pedic relies on a solid economy to support sales. Yet even though the economic recovery slowly improved throughout the year, the gains didn't come fast enough for Tempur-Pedic, which suffered a big plunge early in the year. Read on to find out more about what moved shares of Tempur-Pedic this year.

Stats on Tempur-Pedic

Year-to-date stock return

(41.6%)

Market cap

$1.83 billion

Revenue, past 12 months

$1.43 billion

Net Income, past 12 months

$140 million

1-year revenue growth

6.3%

1-year net income growth

(33.4%)

CAPS rating (out of 5)

****


Source: S&P Capital IQ.

Can Tempur-Pedic finally wake up?
Tempur-Pedic has had problems throughout 2012. In early June, the stock lost about half its value when it said that its full-year earnings would come in almost a third below where analysts had expected, with a corresponding revenue shortfall as well. Then in October, the stock lost nearly a quarter of its value when it cut its 2012 guidance again. International sales have been somewhat of a bright spot at various points during the year, but slow North American sales have definitely held Tempur-Pedic back.

The problems weren't unique to Tempur-Pedic, though. Once-hot 2011 IPO Mattress Firm has given investors similarly sleepless nights, having lost half its value since its April highs as sales throughout the industry have been disappointing. Select Comfort has held up somewhat better, although even it has given investors some concerns about future guidance.

Tempur-Pedic has taken advantage of low prices throughout the industry to make some strategic moves. In September, Tempur-Pedic announced that it would buy Sealy for $242 million in cash. Including assumption of debt, the total deal price tag rose to about $1.3 billion.

Tempur-Pedic sports a relatively cheap valuation at 11 times forward earnings. For the company to make investors comfortable again, Tempur-Pedic will need to demonstrate it can get back into growth mode as an economic recovery takes firmer hold over the nation.

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The article Why Tempur-Pedic Got Put to Sleep in 2012 originally appeared on Fool.com.

Fool contributor Dan Caplinger has no positions in the stocks mentioned above. You can follow him on Twitter, @DanCaplinger. The Motley Fool owns shares of Tempur-Pedic International. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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