Whirlpool Corporation (WHR Quick QuoteWHR - Free Report) delivered a dismal third-quarter 2016 as both the top and the bottom lines missed estimates. Further, the company lowered its adjusted earnings forecast for 2016. Consequently, stock price of this largest home-appliances manufacturer in the world declined 4.3% in the pre-market trading session.

Whirlpool’s quarterly adjusted earnings per share of $3.66 surged 6.1% year over year gaining from leverage to the company’s brands portfolio, product innovation and constant focus on cost productivity. However, the bottom line missed the Zacks Consensus Estimate of $3.88 by a wide margin.

On a reported basis, the company’s earnings were up 5.1% to $3.10 per share from $2.95 earned in the prior-year quarter.

Revenues came in at $5,248 million, down 0.5% from the comparable year-ago quarter revenue of $5,277 million. Additionally, revenues fell short of the Zacks Consensus Estimate of $5,310 million. However, on a currency-neutral basis, Whirlpool registered a marginal sales growth.

Adjusted operating profit in the quarter edged down 1.2% to $413 million from $418 million in the year-ago quarter, while operating margin remained flat at 7.9%. During the quarter, an adverse product price/mix and foreign currency headwinds almost fully neutralized the gains from increased unit volumes, acquisition synergies, ongoing cost productivity and cost- and capacity-reduction initiatives.

Regional Performance

Revenues from North America went up 3.6% year over year to $2.9 billion, while revenues grew 3% on a currency-neutral basis. Adjusted operating profit increased nearly 3% year over year to $346 million, while operating margin expanded 100 basis points (bps) to 12.1%. During the quarter, gains from ongoing cost productivity and improved unit volumes overshadowed the negative impact of unfavorable foreign exchange rates and adverse product price/mix. The company expects its North-American industry shipments to increase 3–4% in 2016.

Revenues from Latin America slumped 6.5% year over year to $800 million. Excluding the negative effects of currency translation, revenues rose 2%. Adjusted operating profit of $45 million increased 45.2% from $31 million reported last year, on the back of favorable price/mix and gains from cost and capacity reductions actions, slightly offset by unit volume declines. Segment operating margin expanded 150 bps to 5.7%. However, the company anticipates industry unit shipments in Brazil to be down 10–12% in 2016.

Revenues from EMEA plunged 13.3% from the prior-year quarter to $1.3 billion. On a currency-neutral basis, revenues dropped 6%. Third-quarter adjusted operating income was $48 million, down 32.4% from $71 million in the year-ago quarter, due to unfavorable price/mix and negative currency effects, somewhat compensated by gains from cost and capacity reductions actions and acquisition synergies. Adjusted operating margin contracted 120 bps to 3.7%. Whirlpool estimates industry unit shipments in 2016 in the range of flat to a 2% increase.

Revenues from Asia dipped 2.3% to $33.8 million in third-quarter 2016 from $346 million in the prior-year quarter. Excluding currency effects, revenues increased 2%. Adjusted operating profit was $17 million as against $27 million reported a year ago, while operating margin contracted 280 bps to 4.9%. Results were hurt by an adverse product price/mix and higher investments in marketing, technology and products, partially mitigated by gains from ongoing cost productivity. The company projects industry shipments in the region to be flat to down 2% in 2016.

Financial Position

Whirlpool had cash and cash equivalents of $1,025 million as of Sep 30, 2016, and long-term debt of $3,718 million.

The company used $175 million of cash in operating activities in the nine months of 2016. Meanwhile, the company’s capital expenditure in the period was $360 million. As of Sep 30, 2016, Whirlpool had negative free cash flow of $466 million.

Guidance

Following the results, Whirlpool adjusted its earnings per share forecasts for 2016 based on the soft demand trends in the U.S. and U.K. as well as the further devaluation of British Pound. The company tweaked the upper-end of its GAAP earnings guidance range to $11.50–$11.75 per share, compared with $11.50–$12.00 guided previously. Further, it lowered the adjusted earnings per share range to $14.00–$14.25 per share, versus the earlier forecast of $14.25–$14.75.

The company now anticipates generating free cash flow of about $700 million for 2016, compared with the previous range of $700–$800 million. Further, the company trimmed its operating cash flows guidance range for 2016 to $1,350–$1,450 million, against $1,400–$1,550 million projected earlier. This guidance includes restructured cash outlays of up to $150 million, legacy product warranty and liability costs of $155 million and capital expenditures of $650–$700 million.

Zacks Rank

Currently, Whirlpool carries a Zacks Rank #4 (Sell). Some better-ranked consumer discretionary stocks include Francesca's Holdings Corporation , Callaway Golf Co. and Sony Corporation , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Francesca's Holdings has gained 27.8% in the last three months and has an average earnings beat of 15.4% in the last four quarters. The company also has a long-term earnings growth rate of 13.8%.

Callaway Golf, with a long-term earnings growth rate of 5%, has surged nearly 13.6% year to date. The company has an average earnings beat of 20.3% in the last four quarters.

Sony has gained nearly 30.6% year to date. Moreover, it has a long-term earnings growth rate of 20%.

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