Shares of Whirlpool Corp. (WHR - Analyst Report) reached a new 52-week high of $156.69 yesterday, and eventually closed trade at $156.15. The average volume of shares traded over the last 3 months was over 1,060K. Notably, this home appliances manufacturing company amassed a year-to-date return of 48.4%.
Moreover, Whirlpool currently trades at a forward P/E of 15.5x, a 3.6% discount to the peer group average of 16.08x. The last traded price is 4.4% below the Zacks Consensus average analyst price target of $163.40, providing sufficient scope for further improvement in the company’s stock price. Additionally, the company’s long-term estimated earnings per share (EPS) growth rate is 29.7%, substantially higher than the peer group average of 19.8%. At present, Whirlpool has a Zacks Rank #2 (Buy).
We believe that the company’s strong price appreciation was mainly driven by Moody’s Corporation’s (MCO - Analyst Report) recent announcement of a positive outlook for the U.S. consumer durable industry. Moody’s declared that consumer durable companies would witness a 5%–6% rise in operating profit in the next 12–18 months owing to recovery in the U.S. economy, signs of stability in the housing market and increased spending by consumers. Apart from Whirlpool, other companies which will likely benefit from these improved trends include Leggett & Platt Incorporated (LEG - Analyst Report) and Jarden Corporation (JAH - Snapshot Report).
Apart from Moody’s recent forecast, we believe that an impressive record of beating the quarterly earnings expectations, a positive fiscal 2013 outlook and a decent dividend yield enabled Whirlpool’s stock price to reach the new high.
With regard to earnings surprise, Whirlpool has beaten the Zacks Consensus Estimate thrice in the trailing 4 quarters and outperformed it by 3.0% in third-quarter 2013. The average positive surprise in the trailing 4 quarters is 1.5%.
Notably, Whirlpool reported outstanding bottom-line results for the third quarter of 2013. Adjusted quarterly earnings of $2.72 per share were significantly higher than the year-ago quarter figure of $1.80 and surpassed the Zacks Consensus Estimate of $2.64. The robust bottom-line performance was primarily driven by the company’s sustained focus on cost and capacity reduction initiatives, along with better price and product mix.
Buoyed by better-than-expected quarterly results, Whirlpool raised its earnings guidance for 2013. For full-year 2013, Whirlpool now expects earnings per share in the range of $10.45–$10.65, up from the prior projection of $10.05–$10.30. Currently, the Zacks Consensus Estimate stands at $10.06 per share, which is much lower than the company’s guidance range.
Apart from strong third-quarter results, Whirlpool’s growth story looks compelling due to its sustained focus on new product development, implementation of cost containment initiatives and global expansion of business to eliminate concentration risks that bode well for future growth.
Whirlpool is also known for its shareholder-friendly moves. Since 1983, the company has increased its quarterly dividend from 22.5 cents to 62.5 cents. Currently, it yields a solid 1.6%, with a payout ratio of 23%. We believe that its continuous dividend payments and increments reflect the growth potential of its earnings and cash flow generation capabilities.
Over the last 101 years, Whirlpool has emerged as the leading manufacturer and supplier of major home appliances. It is considered to be the largest home-appliances manufacturer in the world, ahead of Electrolux AB, LG, Samsung, General Electric Co. and Haier Electronics Group Company Ltd. Moreover, the company is placed among the major home appliance makers in India and Europe.