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Strong Outlook From Mattress Firm (MFRM) Bullish For Tempurpedic (TPX)?

|Includes: MFRM, Tempur Sealy International Inc. (TPX)

Despite slightly missing earnings expectations for Q4, recent IPO Mattress Firm(NASDAQ:MFRM) provided a solid 2013 outlook, noting comps would eventually turn out in the low to mid single digit range. Q4 revenues missed consensus, coming in at $258 million, compared with expectations of $262 million, yet analysts shrugged off the miss on expectations that FY 2013 guidance appeared conservative. Analysts also noted easing comparisons for the balance of the year as early 2012 was exceptionally strong. The mattress industry has been a hotbed of Wall Street activity of late with extreme volatility in Mattress Firm (MFRM), Select Comfort (SCSS) and Tempurpedic (NYSE:TPX). Select Comfort and Tempurpedic shares both rallied close to 7% on the heels of the positive tone of MFRM's call.

With the recent comeback after worries of industry stagnation and on housing optimism, shares of Mattress Firm(MFRM) are now up a staggering 60% since its late 2011 IPO. On the heels of the bullish tone set by management during their Q4 call, Wedbush analysts Joan Storms raised her price target to $35 from $30 and suggested that the 2013 outlook was on the conservative side. Other analysts were generally bullish with Barclays, UBS and Wedbush all optimistic for the balance of 2013. Dramatically different weather patterns for 2013 could have had an impact on comps for the first quarter. Looking back at the fourth quarter the investment community wrote off the negative comps as one time issue.

Looking ahead, Tempurpedic (TPX) will report Q1 earnings and more importantly update its outlook for 2013 as well report progress on the Sealy acquisition the first week of May. The consensus calls for a 12% revenue decline as Tempurpedic attempts to regain lost share. It will launch the "Tempur Choice" designed to compete with Select Comfort's highly successful "Sleep Number" for sleep personalization settings. It is set to debut at a breathtaking price point above $3000. Last year new competition in the memory foam space stifled growth and analysts were caught off sides and growth slowed to a halt despite a myriad of uber-bullish expectations and price targets in the nose bleed $100 range. One of the worst analysts on the Street has been Oppenheimer's Joseph Altobello who called early 2012 guidance "conservative" only to see earnings cut in half over the next few months but call the market reaction an "overreaction" and maintained his buy all the way down before capitulating with a downgrade to Market Perform at the multi-year low of $22. Shares have doubled since his downgrade so bullish investors might remain confident until this contrarian analyst again becomes bullish at which time smart investors would be wise to get cautious.