Restructuring Progress and Tariff Impacts Drive Outlook

Manufacturing company Leggett & Platt (NYSE:LEG) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 6.8% year on year to $1.02 billion. On the other hand, the company’s full-year revenue guidance of $4.15 billion at the midpoint came in 0.6% below analysts’ estimates. Its non-GAAP profit of $0.24 per share was 9.5% above analysts’ consensus estimates.

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Revenue: $1.02 billion vs analyst estimates of $1.02 billion (6.8% year-on-year decline, in line)
Adjusted EPS: $0.24 vs analyst estimates of $0.22 (9.5% beat)
Adjusted EBITDA: $98.2 million vs analyst estimates of $93.4 million (9.6% margin, 5.1% beat)
The company reconfirmed its revenue guidance for the full year of $4.15 billion at the midpoint
Management reiterated its full-year Adjusted EPS guidance of $1.10 at the midpoint
Operating Margin: 6.2%, in line with the same quarter last year
Free Cash Flow was -$6.5 million compared to -$32 million in the same quarter last year
Market Capitalization: $1.27 billion

Leggett & Platt’s first quarter results were shaped by ongoing restructuring actions and persistent weakness in key end markets. Management credited earnings improvement to cost discipline and operational efficiency, with CEO Karl Glassman highlighting continued progress on restructuring initiatives, especially in bedding and hydraulic cylinders. The divestiture of a small U.S. machinery business and ongoing portfolio reviews also featured prominently in the quarter’s operational focus.

Looking ahead, management’s guidance reflects cautious expectations for end-market demand and a dynamic tariff environment. While tariff changes are expected to present both challenges and opportunities, management emphasized the company’s ability to adapt production and sourcing strategies. CFO Ben Burns reiterated that deleveraging and operational improvements remain top priorities, with proceeds from planned divestitures and lower dividends targeted at reducing debt and funding organic growth.

Leggett & Platt’s management addressed how restructuring, tariffs, and demand dynamics influenced recent performance. The quarter’s results were attributed largely to internal efficiency gains and portfolio adjustments, while external pressures persisted.

Restructuring Plan Execution: Management cited significant progress in executing restructuring initiatives, including the sale of a small U.S. machinery business and the launch of a second phase of consolidation in flooring products. These efforts are expected to be substantially complete by year-end and have already generated incremental EBIT (Earnings Before Interest and Taxes) benefits.
Tariff Environment Adaptation: The company described a complex tariff landscape, noting that steel and metal tariffs have driven expanded margins in rod and wire operations but have also created disadvantages for certain bedding products, particularly adjustable bases. Management highlighted ongoing efforts to shift sourcing and production to less impacted regions, especially leveraging operations in Mexico.
Demand Weakness in Key Segments: Residential-facing markets, particularly bedding and home furniture, remained under pressure for the third consecutive year. Management reported continued softness in U.S. mattress production and noted that finished imports gained share, impacting domestic volumes.
Specialized and Automotive Product Trends: In automotive, management anticipates that upcoming tariffs on components could disrupt supply chains but expects limited direct impact due to regional compliance with trade agreements. The Geo Components business saw growth in civil construction, partially offsetting declines elsewhere.
Portfolio Streamlining: The pending sale of the aerospace business, expected to close this year, is positioned as a step toward a more focused and efficient company portfolio. Management indicated that the strategic review of other segments is ongoing and may result in further divestitures.

Management’s outlook for the remainder of the year centers on continued execution of restructuring plans, adapting to evolving tariff impacts, and managing through soft demand in primary end markets.

Restructuring Benefits Realization: Cost efficiencies from restructuring are expected to be fully realized by year-end, with incremental margin gains as demand recovers in residential and commercial markets.
Tariff and Sourcing Adjustments: The company is shifting production and sourcing to mitigate tariff effects, particularly in bedding and components, while aiming to capitalize on any relative advantages from domestic steel production.
Portfolio Optimization and Debt Reduction: Proceeds from divestitures and lower dividend payouts are allocated to debt reduction and organic investments. Management views deleveraging as a prerequisite before considering share repurchases or expanded capital returns.

Susan Maklari (Goldman Sachs): Asked about the timing and ongoing benefits of restructuring, to which management responded that most benefits will materialize by year-end, with further upside possible as volumes recover.
Bobby Griffin (Raymond James): Inquired whether divestiture proceeds and free cash flow would eliminate outstanding commercial paper. CFO Ben Burns confirmed that debt reduction is the priority and reaching target leverage could precede capital returns.
Keith Hughes (Truist Securities): Sought clarification on the company’s exposure to automotive tariffs. Management explained that compliance with North American trade agreements limits direct impact, though indirect demand risks remain.
Peter Keith (Piper Sandler): Asked about recent bedding volume declines and the impact of tariffs. Management noted continued softness but pointed out stable trends in recent months and ongoing tariff-related price adjustments.
Peter Keith (Piper Sandler): Also questioned the status of the company’s portfolio review. CEO Karl Glassman stated that the review remains active, with further divestitures possible if segments do not align with long-term strategy.

In the coming quarters, the StockStory team will monitor (1) the full realization of restructuring benefits and whether these translate into sustained margin improvement, (2) the effects of tariff changes on both cost structure and competitive positioning, and (3) progress on portfolio streamlining, including the completion of the aerospace divestiture and any additional strategic moves. Execution on cost control and successful adaptation to shifting end-market dynamics will be critical signposts for Leggett & Platt’s performance.

Leggett & Platt currently trades at a forward P/E ratio of 8.6×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report.

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