Select Comfort shares fall on sales guidance

NEW YORK -- Select Comfort Corp. shares fell Thursday after the mattress company issued a disappointing revenue prediction for the full year.

THE SPARK: Select Comfort said late Wednesday that its third-quarter profit jumped 52 percent on stronger sales. It also raised its full-year outlook, but its revenue guidance didn't meet market expectations, spooking some investors.

THE BIG PICTURE: Mattress makers have grown intensely competitive in recent years as consumers curbed big-ticket spending. But Select Comfort used new products, aggressive marketing and added stores to get an edge. This is the second time that the company has raised its full-year profit prediction.

Select Comfort said it now expects to post an adjusted profit of $1.51 to $1.53 per share for the year, well ahead of average analysts' predictions of $1.41 per share. The company sees sales growing 20 percent year-over-year, which amounts to roughly $941 million in revenue for 2012. Analysts forecast revenue of $946.4 million for the year.

THE ANALYSIS: Wedbush analyst Joan Storms backed her "Outperform" rating and $36 price target for the stock, saying that investors are overlooking the company's strong third quarter.

Storms said she's confident that the company will be able to boost awareness of its brand, gain market share and ultimately increase its profitability.

Raymond James analyst Budd Bugatch also stuck by his "Strong Buy" rating and increased his price target for the company by $2 to $38.

"The company is gaining share, expanding margins, and adding to its considerable cash position despite increased competition in the specialty bedding category and softening macro conditions," Bugatch wrote in his note to investors.

THE SHARES: Down $2.48, or 7.6 percent, to $30.15 in afternoon trading, after dipping as low as $29 earlier in the session. Over the past 52 weeks, the company's shares have traded between $16 and $35.60.