Bull of the Day: Whirlpool (WHR)


April 02, 2013 |

Two key factors are driving the U.S. economy in 2013; a strong housing market, and a resilient consumer. Bullishness on these fronts is keeping investors optimistic on the second quarter, even with stock s at fresh all-time highs.

Given this confidence, an investment in a company that plays off of trends in both of these sectors could be a great idea. One such company is undoubtedly Whirlpool (WHR - Free Report) , a top manufacturer and marketer of major home appliances.

The company tends to be a big beneficiary of a robust consumer—thanks to many customers looking for an upgrade to items like refrigerators or dishwashers—but also a big winner in housing booms as well. That is because when someone is buying or selling a house, home appliances are usually pretty high on their shopping list, a welcomed trend for investors in Whirlpool.

This has helped to boost shares in Whirlpool up double digits so far in 2013 and nearly 43% in the last six months alone. Both figures crush the S&P 500 in the same time frames, suggesting that shares of WHR are definitely in bull market territory.

Estimate Picture

Given this, some might be thinking that WHR is poised to top out in the near term. However, if you look at recent trends in the analyst estimate revision space, it does imply that WHR could actually have plenty of room to run instead.

In fact, current estimates are suggesting a +30% year-over-year growth in earnings, while the earnings ESP for the current quarter is positive, meaning that the stock could be poised to pop at the next earnings release date.

Investors should also note that looking beyond this quarter, the picture is very bullish as well. Estimates are in universal agreement higher for the current year and next year periods, including a nearly 5% move higher in the projected estimate for the current year.

Clearly, analysts believe that Whirlpool’s growth story can continue and that the firm will remain a prime beneficiary of the surging consumer and housing markets going forward.

For these reasons, we currently see a Zacks Rank of 1 or ‘Strong Buy’ on this well-positioned firm. The Zacks Industry Rank for this company is also in the top 40%, suggesting that there are some positive trends underlying the broader space—as we alluded to earlier—as well.     

Other factors to consider

Despite WHR’s surge over the past few months, the company is still a pretty solid value when looking at many traditional metrics. Forward Price to Earnings comes in at roughly 10, a level that more favorable than what investors see in the S&P 500.

Meanwhile, in terms of debt levels, the company has kept this under control with a current ratio still above 1.0, and a favorable debt/equity trend. In fact, debt to equity is now below 50%, the first time this can be said for WHR—on a yearly basis—since before the Great Recession began.

Bottom Line

Whirlpool is an interesting investment at this point in time because it plays off of two of the biggest and most important economic trends impacting the market. Since both of these are very bullish right now, it has been a great help for WHR’s share price, and especially so when compared to the broad market in the same time frame.

And, even with the surge in WHR’s shares as of late, it is still trading at pretty favorable valuations, suggesting that there could be plenty of room left to run for this top ranked stock. So if you believe in the durability of this rally and the strength of both housing and the consumer, it may be a great time to take the plunge on Whirlpool before the stock runs up even higher over the next few weeks and months.

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