At Foamex, Things Are Firming Up Nicely

No Longer Sagging
Once shunned by the Street because of persistent losses since 2001, Foamex International (FMXI ) -- No. 1 in foam for beds, furniture, and cars -- is generating buzz. Its stock, down to 1.75 a year ago, has sprung up 40%, to 4.75, since late March. Chairman Marshall Cogan was ousted in February, and a new team, led by Mississippi ex-Governor Raymond Mabus Jr., has Foamex headed for a turnaround.

Tim Hasara of Kennedy Capital Management, with an 18% stake, says management is slashing debt and lifting margins. As a result, Hasara forecasts earnings of 35 cents to 40 cents a share in 2004 and 70 cents to 80 cents in 2005, vs. an 88 cents loss in 2003. He sees the stock leaping to 10 in a year. And there's more good news, says one New York fund manager who has bought shares: Two major chemical makers, he says, are in talks on supply pacts that will involve them acquiring stakes of 10% to 20% in Foamex.

Howard Goldberg of investment firm Morgan Joseph has upped his rating on Foamex' bonds from "hold" to "outperform." Foamex, he says, is profiting from lower production costs, new products, and improved ability to pass on raw-material costs. Foamex recently hired Credit Suisse First Boston (CSR ) for strategic advice. Foamex declined comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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