Raymond James has turned bullish on home furnishings company Leggett & Platt, Inc. LEG 1.57%. According to a new report by analyst Budd Bugatch, the firm has upgraded the stock to Outperform and believes that the company’s exposure to China is not fully understood by the market.

China Fears

Leggett & Platt’s stock has fallen more than 10 percent in the past month, and Bugatch believes the primary fear in the market is the risk the company faces from economic weakness in China.

The market sees the company’s outsized exposure to China and has been selling the stock based on assumptions that China weakness will weigh heavily on the company’s bottom line.

For example, Leggett’s automotive business, which has been one of its fastest-growing and most profitable segments, derives up to 50 percent of its revenues from China. However, Bugatch pointed out that only 2–3 percent of the company’s consolidated revenues are consumed in China.

Positives

Despite uncertainty in China, Bugatch believes…

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