Leggett & Platt (LEG)

Manufacturing company Leggett & Platt (NYSE:LEG) reported Q3 CY2025 results exceeding the market’s revenue expectations, but sales fell by 5.9% year on year to $1.04 billion. On the other hand, the company’s full-year revenue guidance of $4.05 billion at the midpoint came in 1% below analysts’ estimates. Its non-GAAP profit of $0.29 per share was in line with analysts’ consensus estimates.

Company Overview

Founded in 1883, Leggett & Platt (NYSE:LEG) is a diversified manufacturer of products and components for various industries.

A healthy housing market is good for furniture demand as more consumers are buying, renting, moving, and renovating. On the other hand, periods of economic weakness or high interest rates discourage home sales and can squelch demand. In addition, home furnishing companies must contend with shifting consumer preferences such as the growing propensity to buy goods online, including big things like mattresses and sofas that were once thought to be immune from e-commerce competition.

Leggett & Platt's primary competitors include Tempur Sealy (NYSE:TPX), Serta Simmons Bedding, Herman Miller (NASDAQ:MLHR), Flexsteel Industries (NASDAQ:FLXS), and private companies L&P Aerospace and Precision Fabrics.

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Unfortunately, Leggett & Platt struggled to consistently increase demand as its $4.17 billion of sales for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Leggett & Platt’s recent performance shows its demand remained suppressed as its revenue has declined by 6.8% annually over the last two years.

We can dig further into the company’s revenue dynamics by analyzing its three most important segments: Bedding, FF&T, and Specialized Products, which are 38.8%, 26.8%, and 34.4% of revenue. Over the last two years, Leggett & Platt’s Bedding (mattresses and foundations) and FF&T (sofa parts and tiles ) revenues averaged year-on-year declines of 11.2% and 6.8% while its Specialized Products revenue (automobile components) was flat.

This quarter, Leggett & Platt’s revenue fell by 5.9% year on year to $1.04 billion but beat Wall Street’s estimates by 1.1%.

Looking ahead, sell-side analysts expect revenue to decline by 2.6% over the next 12 months. Although this projection is better than its two-year trend, it’s tough to feel optimistic about a company facing demand difficulties.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Leggett & Platt’s operating margin has risen over the last 12 months, but it still averaged negative 5.5% over the last two years. This is due to its large expense base and inefficient cost structure.

In Q3, Leggett & Platt generated an operating margin profit margin of 16.5%, up 9.5 percentage points year on year. This increase was a welcome development, especially since its revenue fell, showing it was more efficient because it scaled down its expenses.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Leggett & Platt, its EPS declined by 12.7% annually over the last five years while its revenue was flat. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

In Q3, Leggett & Platt reported adjusted EPS of $0.29, down from $0.32 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Leggett & Platt’s full-year EPS of $1.04 to grow 9.1%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Leggett & Platt has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 6.1%, subpar for a consumer discretionary business.

Leggett & Platt’s free cash flow clocked in at $110.1 million in Q3, equivalent to a 10.6% margin. This result was good as its margin was 3.6 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Leggett & Platt historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.9%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Leggett & Platt’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Leggett & Platt reported $460.7 million of cash and $1.66 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $395.4 million of EBITDA over the last 12 months, we view Leggett & Platt’s 3.0× net-debt-to-EBITDA ratio as safe. We also see its $38.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were also happy its revenue narrowly outperformed Wall Street’s estimates. On the other hand, its full-year revenue and EPS guidance were both lowered, which is never a good sign. Overall, this quarter could have been better. The stock remained flat at $9.28 immediately following the results.

Updated: December 3, 2025 at 9:58 PM EST

Before making an investment decision, investors should account for Leggett & Platt’s business fundamentals and valuation in addition to what happened in the latest quarter.

Leggett & Platt doesn’t pass our quality test. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. On top of that, Leggett & Platt’s declining EPS over the last five years makes it a less attractive asset to the public markets, and its projected EPS for the next year is lacking.

Leggett & Platt’s P/E ratio based on the next 12 months is 10.7x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $11 on the company (compared to the current share price of $11.39).