10 Most Promising Mid-Cap Stocks According to Hedge Funds

5. Tempur Sealy International, Inc. (NYSE:TPX)

Number of Hedge Fund Holders: 56

Market Capitalization as of October 10, 2024: $8.95 Billion

Tempur Sealy International, Inc. (NYSE:TPX) is a mattress manufacturing company headquartered in Kentucky, United States. The bedding provider designs, develops, and manufactures mattresses, adjustable bases, pillows, and other relaxation products. Some of its prominent brands include Tempur, Tempur-Pedic, Cocoon by Sealy, and Stearns & Foster.

The company is committed to delivering solutions to people from across the globe, positioning itself as one of the world leaders in comfort and relaxation. In the second quarter of 2024, the company logged $1.23 billion in sales, down by 2.8% from Q2 2023. While the North American business segment declined, the international business segment saw consistent performance. Despite a slight decline in sales, the company had a gross margin of 44.9%, up from 42.7% in Q2 2023.

In the second quarter, Tempur Sealy International, Inc. (NYSE:TPX) shared its plans to acquire Mattress Firm Group. The acquisition is expected to close in the coming months after important hearings in November. The proposed acquisition with Mattress Firm led to an agreement with Mattress Warehouse for the sale of 73 Mattress Firm retail locations and the company’s Sleep Outfitters subsidiary, which has 103 specialty mattress retail locations and seven distribution centers. Once the deal is closed, Tempur Sealy International, Inc. (NYSE:TPX) will have over 2,800 functional retail locations across the globe and sales from the North American region will come primarily from Mattress Firm. Following the transaction, the company is expected to realize annual run-rate synergies of $100 million by the end of year four.

Overall, the transaction seems to be the missing piece for Tempur Sealy International, Inc. (NYSE:TPX). A decline in sales from the North American region may be offset if the transaction comes through, establishing TPX as a global leader in mattresses and bedding solutions.

The London Company stated the following regarding Tempur Sealy International, Inc. (NYSE:TPX) in its Q2 2024 investor letter:

“Tempur Sealy International, Inc. (NYSE:TPX) – TPX is the leader in the mattress industry. Mattress volume has stabilized in recent months. Stable volume along with pricing gains have led to higher revenue for TPX. In 2023, the company announced plans to acquire Mattress Firm, which has the potential to be materially accretive and strengthen the company’s overall competitive position. Valuation remains attractive, and TPX’s robust free cash flow generation, strong brand equity, and solid management execution support our investment thesis. We have owned the stock for many years in our Small Cap portfolio.”