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Whirlpool (WHR) Up 9.7% Since Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Whirlpool Corporation (WHR - Free Report) . Shares have added about 9.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is WHR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Whirlpool reported dismal first-quarter 2018 results as both earnings and sales missed estimates. However, top and bottom lines improved year over year driven by progress on its global cost-based price increases and fixed cost-reduction initiatives. With this, the company reported negative earnings in six of the last seven quarters. Moreover, this marked its fourth straight quarter of top-line miss.
Q1 Highlights
Whirlpool delivered adjusted earnings per share of $2.81, lagging the Zacks Consensus Estimate of $2.92. However, its bottom line rose 12% from $2.50 per share earned in the year-ago quarter. Bottom-line results gained from smooth progress on its global cost-based price increases and fixed cost reduction initiatives, which also boosted adjusted EBIT.
On a GAAP basis, the company reported earnings of $1.30 per share, down 35.3% from $2.01 in the prior-year quarter.
Revenues of $4,911 million rose nearly 2.6% from the comparable year-ago quarter revenues of $4,786 million. However, the top line fell short of the Zacks Consensus Estimate of $5,003 million. On a currency-neutral basis, sales declined 0.7%.
Further, adjusted operating profit (EBIT) improved 3.5% to $295 million from $285 million in the year-ago quarter. However, operating margin remained flat with last year at 6%. Apart from the aforementioned gains, operating margin was aided by favorable product price/mix and restructuring benefits, partly negated by raw material inflation, unit-volume declines and unfavorable currency.
Regional Performance
Revenues from North America rose 4.2% to $2.5 billion while it increased 2.5% on a currency-neutral basis. Adjusted operating profit margin expanded 20 bps to 11.4%. In dollar terms, operating profit grew 4.7% to $288 million. Notably, operating profit gains reflected from favorable product price/mix and unit-volume growth, which mitigated the negative impact of raw material inflation.
Revenues from Latin America declined 2.5% year over year to $898 million. Excluding currency translations, it dipped 3.2%. Adjusted operating margin of 6.3% contracted 90 bps, mainly due to raw material inflation and unfavorable cost productivity, partly neutralized by favorable product price/mix and restructuring benefits. In dollar terms, operating income declined 13.6% to $57 million.
Meanwhile, revenues from EMEA increased 10% to $1.1 billion. On a currency-neutral basis, it dropped 8.1%. Whirlpool reported adjusted operating loss of $27 million in the first quarter compared with an operating loss of $23 million in the year-ago quarter. The decline can be attributed to raw material inflation, unit-volume declines and unfavorable currency, offset by favorable product price/mix and cost productivity gains.
Revenues from Asia improved nearly 3% to $448 million from $435 million in the prior-year quarter. Excluding currency effects, revenues decreased 1.9%. Moreover, the segment reported adjusted operating profit of $19 million, down 20.8% from the year-ago quarter. Further, adjusted operating margin contracted 140 bps to 4.2%. Raw material inflation and negative-currency movements were the main culprits for the decline, partly offset by the favorable impact from cost productivity.
Financial Position
Whirlpool had cash and cash equivalents of $1,041 million as of Mar 31, 2018, and long-term debt of $4,190 million.
The company used $713 million cash in operating activities in first-quarter 2018 and reported negative free cash flow of $756 million. Capital expenditures for the first quarter totaled $66 million.
Going ahead, the company remains committed to its balanced capital-allocation approach. Consequently, it expects to continue buying back shares in 2018 while hoping to return more value to shareholders through its recently raised quarterly dividend.
On Apr 16, Whirlpool declared a quarterly cash dividend of $1.15 per share, marking an increase of 5 cents from the previous rate of $1.10 per share. This dividend is payable on Jun 15, to shareholders with record as of May 18.
Guidance
Following the not-so-impressive first quarter, Whirlpool slightly lowered its GAAP earnings per share forecast while retaining adjusted earnings view for 2018. It continues to envision adjusted earnings per share of $14.50-$15.50. On a GAAP basis, it now anticipates earnings in the range of $12.30-$13.30 per share compared with $12.45-$13.45 per share projected earlier.
Further, the company revised its full-year tax-rate expectation to nearly 20%, which along with favorable product price/mix is likely to aid earnings. However, this will be partly offset by lower global-revenue growth and increased raw material inflation.
The company reiterated its forecast of generating free cash flow of $1-$1.1 billion in 2018 while operating cash flows are projected to be $1.7-$1.8 billion. This guidance includes restructured cash outlays of approximately $300 million, pension contributions of $35 million and capital expenditures of $675 million related to free cash flows.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
VGM Scores
At this time, WHR has a poor Growth Score of F, however its Momentum is doing a lot better with an A. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
WHR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Whirlpool (WHR) Up 9.7% Since Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Whirlpool Corporation (WHR - Free Report) . Shares have added about 9.7% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is WHR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Whirlpool Q1 Earnings & Sales Miss, GAAP View Trimmed
Whirlpool reported dismal first-quarter 2018 results as both earnings and sales missed estimates. However, top and bottom lines improved year over year driven by progress on its global cost-based price increases and fixed cost-reduction initiatives. With this, the company reported negative earnings in six of the last seven quarters. Moreover, this marked its fourth straight quarter of top-line miss.
Q1 Highlights
Whirlpool delivered adjusted earnings per share of $2.81, lagging the Zacks Consensus Estimate of $2.92. However, its bottom line rose 12% from $2.50 per share earned in the year-ago quarter. Bottom-line results gained from smooth progress on its global cost-based price increases and fixed cost reduction initiatives, which also boosted adjusted EBIT.
On a GAAP basis, the company reported earnings of $1.30 per share, down 35.3% from $2.01 in the prior-year quarter.
Revenues of $4,911 million rose nearly 2.6% from the comparable year-ago quarter revenues of $4,786 million. However, the top line fell short of the Zacks Consensus Estimate of $5,003 million. On a currency-neutral basis, sales declined 0.7%.
Further, adjusted operating profit (EBIT) improved 3.5% to $295 million from $285 million in the year-ago quarter. However, operating margin remained flat with last year at 6%. Apart from the aforementioned gains, operating margin was aided by favorable product price/mix and restructuring benefits, partly negated by raw material inflation, unit-volume declines and unfavorable currency.
Regional Performance
Revenues from North America rose 4.2% to $2.5 billion while it increased 2.5% on a currency-neutral basis. Adjusted operating profit margin expanded 20 bps to 11.4%. In dollar terms, operating profit grew 4.7% to $288 million. Notably, operating profit gains reflected from favorable product price/mix and unit-volume growth, which mitigated the negative impact of raw material inflation.
Revenues from Latin America declined 2.5% year over year to $898 million. Excluding currency translations, it dipped 3.2%. Adjusted operating margin of 6.3% contracted 90 bps, mainly due to raw material inflation and unfavorable cost productivity, partly neutralized by favorable product price/mix and restructuring benefits. In dollar terms, operating income declined 13.6% to $57 million.
Meanwhile, revenues from EMEA increased 10% to $1.1 billion. On a currency-neutral basis, it dropped 8.1%. Whirlpool reported adjusted operating loss of $27 million in the first quarter compared with an operating loss of $23 million in the year-ago quarter. The decline can be attributed to raw material inflation, unit-volume declines and unfavorable currency, offset by favorable product price/mix and cost productivity gains.
Revenues from Asia improved nearly 3% to $448 million from $435 million in the prior-year quarter. Excluding currency effects, revenues decreased 1.9%. Moreover, the segment reported adjusted operating profit of $19 million, down 20.8% from the year-ago quarter. Further, adjusted operating margin contracted 140 bps to 4.2%. Raw material inflation and negative-currency movements were the main culprits for the decline, partly offset by the favorable impact from cost productivity.
Financial Position
Whirlpool had cash and cash equivalents of $1,041 million as of Mar 31, 2018, and long-term debt of $4,190 million.
The company used $713 million cash in operating activities in first-quarter 2018 and reported negative free cash flow of $756 million. Capital expenditures for the first quarter totaled $66 million.
Going ahead, the company remains committed to its balanced capital-allocation approach. Consequently, it expects to continue buying back shares in 2018 while hoping to return more value to shareholders through its recently raised quarterly dividend.
On Apr 16, Whirlpool declared a quarterly cash dividend of $1.15 per share, marking an increase of 5 cents from the previous rate of $1.10 per share. This dividend is payable on Jun 15, to shareholders with record as of May 18.
Guidance
Following the not-so-impressive first quarter, Whirlpool slightly lowered its GAAP earnings per share forecast while retaining adjusted earnings view for 2018. It continues to envision adjusted earnings per share of $14.50-$15.50. On a GAAP basis, it now anticipates earnings in the range of $12.30-$13.30 per share compared with $12.45-$13.45 per share projected earlier.
Further, the company revised its full-year tax-rate expectation to nearly 20%, which along with favorable product price/mix is likely to aid earnings. However, this will be partly offset by lower global-revenue growth and increased raw material inflation.
The company reiterated its forecast of generating free cash flow of $1-$1.1 billion in 2018 while operating cash flows are projected to be $1.7-$1.8 billion. This guidance includes restructured cash outlays of approximately $300 million, pension contributions of $35 million and capital expenditures of $675 million related to free cash flows.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower.
VGM Scores
At this time, WHR has a poor Growth Score of F, however its Momentum is doing a lot better with an A. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
WHR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.