Leggett & Platt, Incorporated (LEG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call indicates weak sales guidance and EPS projections, margin declines in key segments, and unresolved industry challenges, particularly in the mattress sector. Although management provided optimistic guidance, the lack of significant recovery and clear details on improvements dampens confidence. The market cap suggests moderate sensitivity to these factors, leading to a likely negative stock price reaction.
Key Financial Performance
Fourth Quarter Sales $939 million, down 11% versus the fourth quarter of 2024. Reasons: Sales weakness at a certain customer, retailer merchandising changes in Adjustable Bed and Specialty Foam, continued soft demand in residential end markets, customer supply chain disruptions in Automotive, and lower demand in Hydraulic Cylinders. Growth in Textiles and Work Furniture, along with higher trade wire and rod sales, partially offset demand declines.
Fourth Quarter EBIT $32 million and adjusted EBIT was $48 million, down $8 million versus fourth quarter 2024. Reasons: Lower volume and earnings associated with divested aerospace business, partially offset by metal margin expansion and restructuring benefit.
Fourth Quarter EPS $0.18. On an adjusted basis, $0.22, a 5% increase from fourth quarter 2024 adjusted EPS of $0.21. Reasons: Adjusted EPS increase due to operational efficiency improvements and restructuring benefits.
Full Year 2025 Sales $4.05 billion, decreased 7% compared to 2024. Reasons: Continued weak demand in residential end markets, sales weakness at a certain customer, retail merchandising changes in Adjustable Bed and Specialty Foam, divestitures, lower demand in Automotive and Hydraulic Cylinders, and restructuring-related sales attrition. Partially offset by growth in Textiles and Work Furniture, higher trade wire and rod sales, raw material-related selling price increases, and currency benefit.
Full Year EBIT $786 million, increased primarily due to the non-recurrence of $676 million in goodwill impairment charges during 2024. Adjusted EBIT decreased $4 million to $263 million. Reasons: Lower volume, partially offset by restructuring benefit and metal margin expansion.
Full Year EPS $1.69 and adjusted EPS was $1.05, flat versus 2024. Reasons: Adjusted EPS remained flat due to offsetting factors of operational efficiency and lower volume.
Operating Cash Flow (2025) $338 million, an increase of $33 million versus 2024. Reasons: Primarily driven by working capital benefits.
Net Debt to Adjusted EBITDA Decreased from 3.8x to 2.4x by the end of 2025. Reasons: Aerospace divestiture proceeds, cash from operations, and real estate sales allowed debt reduction by $376 million.
Restructuring Plan EBIT Benefit Approximately $70 million of EBIT benefit with total cost of $80 million. Reasons: Restructuring actions and real estate sales contributed to the benefit.
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Operating Highlights
Eco-Base and ComfortCore bedding products: Continued growth in semi-finished products, particularly Eco-Base and pre-foam-encased ComfortCore.
Specialty Foam: Significant progress in diversifying and expanding the customer base.
Medical nonwovens: Poised to introduce additional new products in 2026.
Vietnam facility: Opened a facility in Vietnam to better serve customers in the growing furniture production region.
Geo Components retail business: Saw growth and gained share at major home improvement retailers.
Restructuring plan: Substantially completed the 2024 restructuring plan, delivering greater EBIT benefit at lower cost than expected.
Balance sheet improvement: Reduced debt by $376 million, bringing net debt to adjusted EBITDA from 3.8x to 2.4x.
Operational efficiency: Achieved sustainable improvements contributing to profitability and cash flow generation.
Aerospace business divestiture: Divested Aerospace business in Q3 2025, using proceeds to retire commercial paper and accelerate deleveraging.
Focus on core operations: Simplified portfolio to ensure focus on core operations.
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Risk or Challenges
Residential Market Demand: Residential markets, which account for roughly half of the company's revenue, remain in a multiyear depression with demand well below average cycle levels. This creates significant uncertainty for future revenue growth.
Bedding Products Segment: Demand in the Bedding Products segment is expected to decline in 2026 due to volume declines in Adjustable Bed and Specialty Foam, as well as customer program changes initiated in 2025.
Automotive Industry Challenges: The automotive segment faces a challenging industry backdrop, including inflationary pressures in North America, tariff-related cost recovery by automakers, and export pressures from Chinese EV manufacturers in Europe.
Hydraulic Cylinders Demand: Lower demand in Hydraulic Cylinders is expected to persist, impacting the Specialized Products segment.
Residential-Focused Businesses: Continued soft demand in residential-focused businesses, including Home Furniture and Flooring, creates ongoing challenges for the Furniture, Flooring, and Textile Products segment.
Customer Supply Chain Disruptions: Customer supply chain disruptions in the Automotive segment have negatively impacted sales and are expected to continue.
Unsolicited Offer Costs: Costs associated with the unsolicited offer from Somnigroup are expected to impact earnings per share in 2026.
Restructuring Costs: Restructuring costs related to cost improvement and footprint optimization opportunities are expected to impact earnings in 2026.
Economic Uncertainty: General economic uncertainty and inflationary pressures are creating challenges across multiple segments, particularly in residential and automotive markets.
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Guidance & Outlook
2026 Sales Guidance: Expected to be $3.8 billion to $4.0 billion, down 1% to 6% versus 2025. Divestitures are expected to reduce sales by 3%. Volume is expected to be flat to down low single digits, with specific declines in Bedding Products and Specialized Products, and flat performance in Furniture, Flooring, and Textile Products. Inflation and currency benefits are expected to increase sales by low single digits.
2026 Earnings Per Share (EPS) Guidance: Expected to be $0.92 to $1.38, including impacts from restructuring costs, unsolicited offer costs, and real estate sales gains. Adjusted EPS is expected to be $1 to $1.20, reflecting operational efficiency improvements, cost management, favorable product mix, and metal margin expansion benefits.
2026 Adjusted EBIT Margin: Expected to range from 6.3% to 7.0%, reflecting operational efficiency improvements and disciplined cost management.
2026 Cash Flow from Operations: Expected to be $225 million to $275 million, with no anticipated benefit from working capital but a continued focus on cash flow generation.
2026 Capital Expenditures (CapEx): Expected to be $100 million to $115 million, reflecting timing shifts from 2025 and replacement of equipment lost in a fire within the Bedding segment.
Bedding Products Segment Outlook for 2026: Demand expected to decline low single digits due to volume declines in Adjustable Bed and Specialty Foam. U.S. Spring is anticipated to perform in line with the U.S. mattress market, which is expected to be flat to up low single digits.
Specialized Products Segment Outlook for 2026: Automotive volume expected to reflect a challenging industry backdrop, with overall performance in line with broader market trends (down 1% to 2%). Excluding Aerospace, comparable sales are expected to be flat to slightly above 2025, with currency benefits offsetting lower volume and pricing.
Furniture, Flooring, and Textile Products Segment Outlook for 2026: Residential-focused businesses expected to face demand uncertainty, while growth is anticipated in textiles, particularly in Geo Components and nonresidential markets in Fabric Converting.
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Shareholder Return Plan
Dividends: The company has a long-term priority of returning cash to shareholders through dividends. This remains consistent with their financial strategy.
Share Repurchases: The company plans to use excess cash flow to pursue opportunities for share repurchases as conditions allow. This is part of their long-term priorities for cash usage.
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Key Q&A
Q:Can you talk about how restructuring efforts are impacting segment margins and what additional opportunities for cost structure improvement might exist?
A:The restructuring efforts have resulted in $63 million of benefits in 2025, with an additional $5 million expected in 2026, totaling a $70 million run rate. The Bedding segment saw significant benefits, along with the Specialized segment (Hydraulic Cylinders) and FF&T segment (Home Furniture and Flooring). Additional opportunities for cost structure improvement are being analyzed, but no specific announcements have been made yet.
Q:What is the outlook for the Bedding market and the potential recovery if housing does not rebound?
A:The company does not expect a macro market recovery in its 2026 forecast. The Bedding market is expected to be flat to up low single digits, driven by seasonal patterns and lapping early struggles from 2025. Factors like housing, consumer confidence, and affordability are critical, but no significant recovery is built into the guidance.
Q:Can you provide guidance for revenue and margins for each segment for this year?
A:For Bedding, net trade sales and volume are expected to be down low single digits, with margins up 150 basis points. For Specialized Products (adjusted for Aerospace divestiture), organic sales and volume are expected to be down low single digits, with margins down 150 basis points. For Furniture, Flooring, and Textile (FF&T), net trade sales and volumes are expected to be flat, with margins also flat.
Q:What caused the notable decrease in U.S. Spring volumes in 4Q versus 3Q?
A:The primary reason for the decrease was customer consolidation in 4Q. Additionally, normal seasonality and a tough comparison against a strong 4Q in the previous year contributed to the decline.
Q:What were the impacts of customer supply chain disruptions in the Auto segment, and are there lingering issues in 1Q?
A:Disruptions included a Dutch semiconductor company shutdown, an aluminum manufacturer fire in North America, and specific customer issues in Europe (e.g., cyberattacks and inventory adjustments). These issues have been resolved, and no lingering impacts are expected in 1Q.
Q:What are the capital allocation priorities, and is the goal to reach a 2x leverage target?
A:The priorities are to fund organic growth, pursue small strategic acquisitions, and return excess to shareholders via repurchases or dividends. The near-term goal is to move closer to the 2x leverage target, which is expected to be achieved by the end of the calendar year.
Q:Are customer disruptions in the Bedding segment expected to end in 2026?
A:Most disruptions are expected to be lapped early in the year. While there is always a chance of new disruptions, the guidance assumes a flat Spring business, balancing potential volume gains and disruptions.
Q:What is the historical perspective on the prolonged challenges in the mattress industry?
A:The current prolonged challenges in the mattress industry are unprecedented. Historically, Bedding has been an early indicator of recovery in economic cycles, but this has not been the case recently. Normalized consumption in the U.S. is estimated at 34-35 million mattresses annually, but it has been below 30 million for a while.
Q:What are the 2026 EPS growth drivers, including sales mix and metal margin expansion?
A:EPS growth drivers include favorable sales mix in Bedding (trade rod, wire, and U.S. Spring business), operational efficiency improvements, and continuation of favorable steel economics throughout 2026. Additional restructuring benefits will also contribute.
Q:What are the organic growth assumptions by segment and quarter for 2026?
A:Organic growth is expected to follow normal seasonality, with 1Q and 4Q being lower and 2Q and 3Q being stronger. Growth is expected to be steady throughout the year, with some potential early impact from weather-related disruptions.
Q:What are the early reads on mattress industry trends for Q1, and what are the long-term growth drivers for the Bedding segment?
A:Early in Q1, weather events have impacted retail activity and facility operations. Long-term growth drivers for Bedding include housing, consumer confidence, and affordability. Innovation and product development are also expected to contribute.
Q:What caused the significant drop in FF&T margins in 4Q, and how will they recover?
A:Factors include weak consumer demand in Flooring, raw material-related issues in Textiles, currency impacts, and costs associated with launching a greenfield home furniture site in Vietnam. Productivity improvements and stabilization in raw material costs are expected to help margins recover.
Q:Are there plans to shift production geographically to align with customer needs?
A:In Automotive, there is a push for more regional sourcing, particularly in North America. The company is addressing these needs and relocating production as required. For other segments, the company feels well-positioned geographically.
Q:What is the outlook for working capital management?
A:The company has done well in managing working capital, achieving an $83 million benefit in 2025. For 2026, no significant working capital benefit is expected, and there may be a slight use of cash. As sales grow, the company aims to maintain its percentage of sales mark.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on additional cost structure improvement opportunities, stating that it would be premature to announce anything. They also did not provide clarity on when a recovery in the Bedding market might occur, citing uncertainty in consumer confidence and housing. Additionally, they did not elaborate on the potential impact of regional sourcing changes in Automotive beyond general statements.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Adjustable Bed
Aerospace divestiture
Automotive
Bed demand
Bedding Products
EBIT volume
Executive
Furniture trade
Geo Components
Home Furniture
Hydraulic Cylinders
Leggett Platt
OEM Tier
Textiles Work
Work Furniture
benefit capital
benefit metal
change Adjustable
currency benefit
customer base
digit Specialized
digit volume
divestiture sale
foundation
merchandising change
opportunity share
optimization
retailer
sale weakness
term demand
timing
weakness customer
wire rod
LEG Transcript
Killam Apartment REIT (KMP.UN:CA) Q4 2025 Earnings Call Transcript
Unknown2-12
The earnings call summary presents a mixed financial picture. Basic financial performance shows a decline in net income, but NOI and FFO per unit have increased, suggesting operational strength. Product development updates are limited, with delays in renovations and no immediate new projects. Market strategy is stable, focusing on geographic diversification and dispositions. Financial health is moderate, with improved debt ratios but fair value losses. Shareholder returns are supported by buybacks. Q&A reveals concerns about management clarity and future project plans. Given the small-cap nature, the overall sentiment is neutral, predicting a stock price change of -2% to 2%.
Leggett & Platt, Incorporated (LEG) Q4 2025 Earnings Call Transcript
Unknown2-12
The earnings call indicates weak sales guidance and EPS projections, margin declines in key segments, and unresolved industry challenges, particularly in the mattress sector. Although management provided optimistic guidance, the lack of significant recovery and clear details on improvements dampens confidence. The market cap suggests moderate sensitivity to these factors, leading to a likely negative stock price reaction.
Leggett & Platt, Incorporated (LEG) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call reflects a mixed sentiment. While there are positive aspects like restructuring benefits, margin improvements, and growth opportunities, there are also concerns about weak guidance, inconsistent performance across segments, and lack of specifics on shareholder returns. The market cap suggests moderate volatility, leading to a neutral stock price prediction.
Leggett & Platt, Incorporated (LEG) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call presents mixed signals. Financial performance showed restructuring benefits, but guidance for 2025 sales and EPS is weak. The aerospace divestiture and domestic production focus are positive, yet the market strategy lacks clarity. The Q&A revealed concerns about tariffs and consumer demand, but optimism remains for the third quarter. The positive impact of tariffs on margins and operational efficiency improvements are offset by volume declines in key segments. Given the company's small market cap, the stock price is likely to remain stable, resulting in a neutral sentiment prediction.
LEG Slides
LEG Report
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