Sex is Less Popular than Sleep But Temper-Pedic Plans to Capitalize on Both

By Roger Baettig | January 28 2013 1:47 PM

Two of the top mattress companies reported earnings last Thursday.

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Friday, the market reacted, giving a thumbs-up to Tempur-Pedic (NYSE: TPX [FREE Stock Trend Analysis]) which closed at $40.79, up more than 6 percent; and a thumbs-down to Select Comfort (NASDAQ: SCSS) which ended the day at $23.16, down nearly 18 percent.

Tempur-Pedic was one of Friday’s 10 biggest gainers, posting better-than-expected quarterly earnings of $0.60, beating analysts’ expectations by a nickel.

Revenue for TPX dropped 7 percent in the quarter, but it too, beat estimates. Guidance for 2013, at $2.55 was less than the $2.73 projected by the street.

Select Comfort, on the other hand, missed earnings estimates and offered less than inspiring guidance in its quarterly report. This included EPS of $0.22, well below the $0.32 Wall Street had expected.

Although sales for the maker of the Sleep Number bed increased 17 percent during the quarter, compared with the net sales drop of 7 percent for Tempur-Pedic, the difference maker Friday seems to have been the fact that TPX beat estimates and Select Comfort did not.

Unless, of course, investors were acting on a survey by the Better Sleep Council, that of the two things commonly done in bed, sleep and sex, people prefer the latter by a 3 to 2 margin.

This statistic might be important since a Barron’s report suggested Tempur-Pedic beds, which mold themselves to the body are much more conducive to sleep than that other popular activity.

Sealy (NYSE: ZZ), which makes a much more traditional mattress, raised a few eyebrows with a sexy commercial called "Afterglow" in which couples show interest in something other than sleep.

Sealy's stock has outperformed Tempur-Pedic by 80 percent and Select Comfort by 40 percent over the last year. Tempur-Pedic is in the process of acquiring Sealy.

Tempur-Pedic was down more than 40 percent last year but analysts aren’t bearish on the stock. With 4 “Buys” or “Strong Buys” and 9 “Holds” and a stock that has reached the mean analyst price target, watch for upgrades if it continues in the uptrend that started in November.

Is it possible that Tempur-Pedic is trying to cover all the bases – in bedding? With one of the best products for sleeping as well as one advertised as suitable for, “other than sleeping,” Tempur-Pedic might be positioning itself for a good night’s sleep.

On the other hand, maybe Friday’s results were all about those earnings reports after all.