Tempur-Pedic (TPX ) shares fell after the company posted 25 cents, vs. 18 cents, second-quarter earnings per share. It still sees $1.10-$1.13 EPS for 2005. CIBC World downgraded the stock.
Analyst Joseph Altobello says he is downgrading Tempur-Pedic to sector perform from sector outperform. He cites his projection of increased competition in the visco-elastic bedding category somewhat earlier than expected, resulting in a downward impact on pricing and margins.
In particular, he thinks the news that the company is unveiling an entry-level priced bed at next week's trade show (vs. a premium-priced bed as he had previously thought) signals a change in strategy and likely presages a period of priced-based competition.
Altobello cut his 1.15 2005 EPS estimate to $1.10, $1.40 2006 EPS forecast to $1.28, and his $28 price target to $20.