LEG Bearish Setup: Potential Put Play?

Leggett & Platt is a diversified manufacturer producing engineered components and products across three segments. The Bedding Products segment provides steel rod, drawn wire, 'innersprings', specialty foam, and finished mattresses to bedding manufacturers, retailers, and e-commerce platforms. The Specialized Products segment focuses on automotive comfort systems, aerospace tubing, and hydraulic cylinders, serving automotive OEMs, aerospace suppliers, and mobile equipment manufacturers. The Furniture, Flooring & Textile Products segment supplies steel mechanisms, motion hardware, springs, and seat suspensions to home and work furniture manufacturers. They also produce carpet cushion, flooring underlayment, structural fabrics, and 'geo components' for various markets, including flooring retailers, contractors, and furniture producers. Leggett & Platt differentiates itself through vertical integration in steel rod and wire, efficient operations, innovation, product quality, and customer service.

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LEG's technical outlook appears mildly bearish based on recent price action and indicator behavior. The stock has experienced a significant downtrend over the past 90 days, falling from a high of around $10.33 in late July to its current price of $8.925. The recent price is below both the 21-day EMA ($9.24) and the 50-day SMA ($9.27), signaling continued short-term weakness. The MACD is negative (-0.11), with the MACD line below the signal line, indicating bearish momentum. The RSI is at 46.74, suggesting that the stock is neither overbought nor oversold but trending towards oversold territory. The stochastic oscillator (STOCHk) at 35.31 and STOCHd at 53.94 also suggest potential for further downside. While there was a significant price increase on October 28th, this appears to be an outlier, and the overall trend remains downward. The ADX is at 20.29, indicating the presence of a trend, and the recent ROC of 2.74 further confirms the bearish sentiment.

The MD&A presents a mixed picture of the company's performance. `Trade sales` decreased by 6% for the three months ending September 30, 2025, totaling $1,036 million, compared to the same period in 2024. The decline was attributed to lower volume in residential end markets, Automotive, and Hydraulic Cylinders. However, there was growth in Textiles and Work Furniture, with raw material-related selling price increases and currency benefits partially offsetting the decrease. The company reported `EBIT` growth, primarily from the $87 million gain from the sale of the Aerospace Products Group and a $13 million gain from net insurance proceeds. However, the underlying business segments revealed further weakness. For the nine months ended September 30, 2025, `Net cash provided by operating activities` was $217 million, an increase of $33 million versus the same period of 2024, primarily driven by working capital improvements. Management expects 2025 overall demand to be down from 2024 levels due to uncertainties in the market.

The earnings call presents a moderately bullish outlook, driven by restructuring benefits and margin expansion, despite ongoing market softness. Management highlighted improved earnings year-over-year and progress in strengthening the balance sheet, with CEO Karl Glassman stating, 'We are more efficient, more agile and more financially sound.' While second quarter sales declined 6% due to soft demand in residential end markets and restructuring-related attrition, adjusted EPS increased 3% to $0.30. The company maintained its full-year 2025 sales guidance of $4.0 billion to $4.3 billion and adjusted EPS guidance of $1.00 to $1.20. Metal margin expansion, particularly due to 232 steel tariffs, contributed positively, and management expects this to be sustainable. CFO Ben Burns noted that they 'expect restructuring costs of $15 million to $25 million in 2025, down from our prior estimate,' with anticipated incremental EBIT benefits of $35 million to $40 million this year. While challenges persist in specific segments like Home Furniture due to tariff-related disruptions, management expressed optimism about the potential positive impact of tariffs on mattress imports, particularly if transshipment is effectively addressed. Overall, the call conveys confidence in the company's strategic direction and ability to navigate market uncertainties.

LEG's financial performance presents a mixed picture. Revenue has fluctuated, starting at $1,097.0M in Q1 2024, peaking at $1,129.2M in Q2 2024, and then showing volatility, with Q3 2025 reporting a revenue of $0. The gross profit ratio has also been inconsistent, ranging from 0.163 to 0.181, suggesting unstable profitability. Operating cash flow has been highly variable; the most recent available data from Q2 2025 shows a positive operating cash flow of $84.0M, but Q1 2024 showed negative operating cash flow of -$6.1M. Total debt has decreased from $2,293.2M in Q1 2024 to $1,955.6M in Q2 2025, but then decreased to $0 in Q3 2025. The substantial net loss of -$602.2M in Q2 2024 raises concerns, although it is offset by net income of $127.1M in Q3 2025, though revenue was $0. Overall, the inconsistency in revenue, profitability, and cash flow, coupled with fluctuating debt levels, suggests caution is warranted regarding LEG's short-term financial health.

The company presents a moderately bullish investment profile based on its key metrics and financial ratios. Revenue has shown positive growth, indicating a healthy demand for its products or services. The gross margin has remained relatively stable, suggesting efficient cost management. The Return on Equity (ROE) indicates a solid return for shareholders. The Price-to-Earnings (P/E) ratio suggests the company is appropriately valued by the market. The debt-to-equity ratio has seen a decrease, showcasing the company's improved financial leverage. The current ratio signifies the company's strong ability to meet its short-term obligations. Overall, the company demonstrates a stable and growing business model with a healthy balance sheet, making it a moderately attractive investment for the next 6-12 months.