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Tempur Soars 8% On Bumped Up 3Q Sales  Outlook
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Tempur Soars 8% On Bumped Up 3Q Sales Outlook

Shares of Tempur Sealy International soared 8.4% on Monday after the company said that its 3Q sales are expected to grow at a faster pace mainly fueled by demand for its US Temper-Pedic products. The mattress maker now anticipates 3Q revenues to increase 30% year-over-year up from its previous projection of 25%. Wall Street analysts had expected a 26% growth rate.

Tempur Sealy (TPX) stated in a business update that the sales forecast is mainly driven by improved quarter-to-date order trends for its US Tempur-Pedic products. However, the company also cautioned that it is facing capacity constraints for US products, including supply-chain limitations.

Tempur CEO Scott Thompson said, “Tempur-Pedic branded products are now growing materially higher than the growth on Sealy products in the U. which has raised our profit expectations for the quarter. Free cash flow has also been strong and our confidence in positive industry trends has increased.” (See TPX stock analysis on TipRanks).

Additionally, the company announced that it will repay its $200 million 364-day incremental term loan, which will save it $5 million annually in interest expenses and remove certain restrictions on share repurchases and dividend payments as well.

Following the business update, Merrill Lynch analyst Curtis Nagle raised the stock’s price target to $130 (39.9% upside potential) from $120 and reiterated a Buy rating saying that the company provided a strong 3Q sales update. Nagle believes that Tempur’s solid growth momentum is likely to continue at least for the next year.

Currently, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 9 Buys and 2 Holds. The average price target of $103.13 implies an upside potential of about 11% to current levels. Shares have gained about 6.7% year-to-date.

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