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Whirlpool Beats Earnings Estimates

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Whirlpool Corporation’s (WHR - Free Report) adjusted earnings came in at $2.37 per share in the second quarter of 2013, substantially higher than $1.55 in the year-ago period. It marginally surpassed the Zacks Consensus Estimate of $2.36.

The robust quarterly performance was primarily driven by the company’s sustained focus on cost and capacity reduction initiatives and increased revenue. Moreover, reported earnings jumped 70.6% to $2.44 per share in the quarter from $1.43 in the year-ago period.

Revenue in the quarter increased approximately 5.3% year over year to $4,748.0 million, surpassing the Zacks Consensus Estimate of $4,678.0 million. The year-over-year surge in the top line was primarily driven by higher demand for the company’s innovative products. Moreover, Whirlpool registered year-over-year sale growth of nearly 6% after excluding the impact of foreign currency translation and lower monetization of Brazilian (BEFIEX) tax credits.

Gross profit improved 12.2% year over year to $817.0 million from $728.0 million a year ago. Gross margin expanded 110 basis points (bps) to 17.2% from 16.1% in the year-ago quarter. Adjusted operating profit jumped 50.9% to $335.0 million from $222.0 million in the year-ago quarter. Consequently, adjusted operating margin expanded 220 bps to 7.1% versus 4.9% in the second quarter of 2012.

Regional Performance

Revenues from North America grew 4% year over year at $2.6 billion. Adjusted operating profit jumped 40.9% to $262.0 million in the quarter from $186.0 million in second-quarter 2012. The year-over-year growth in operating profit was due to higher sales, better product price mix along with cost and capacity reduction measures, partially offset by increased material costs. Further, in view of the current economic scenario, the company expects its U.S. industry shipments to increase in the range of 6% – 8% in 2013, up from 2% – 3% forecasted earlier.

Revenues from Latin America increased 6% to $1.2 billion on a year-over-year basis. However, excluding the effects of currency translation and Brazilian tax credits, revenue grew 8.0%. Adjusted operating income grew 9.9% year over year at $111.0 million, primarily driven by higher sales, ongoing productivity initiatives partially offset by increased material costs and unfavorable foreign currency exchange rate. Further, the company now expects appliance industry shipments in Latin America to increase in the range of 1%–3% in 2013.

Revenues from Europe, Middle East and Africa grew 5.8% to $731.0 million in the quarter. The region reported an operating loss of $6.0 million narrowing from a loss of $27.0 million in the year-ago quarter. Whirlpool expects industry unit shipments to be in the range of flat to negative 2% in 2013 due to the prevailing weak economic conditions in Europe.

Revenues from Asia went up 2.1% to $246.0 million from $241.0 million in first-quarter 2012. However, excluding the negative impact of currency translation, revenues increased 4%. Operating income remained flat year over year at $14.0 million as the benefit from increased sales and ongoing productivity initiatives were fully offset by higher material costs and unfavorable foreign currency translation. The company now expects industry shipments in the region to remain flat in 2013 compared with 2012.

Financial Position

Whirlpool had cash and cash equivalents of $670 million as of Jun 31, 2013 compared with $1,168.0 million as of Dec 31, 2012. Long-term debt was $1,936.0 million as of Jun 31, 2013 compared with $1,944.0 million as of Dec 31, 2012.

The largest home-appliances manufacturer in the world, which comes ahead of ElectroluxAB, LG, Samsung, General Electric Co. (GE - Free Report) and Haier Electronics Group Company, Ltd., has a negative cash flow of $196.0 million from operations in Jun 31, 2013 compared with $355.0 million in the prior-year period. Meanwhile, during the first six months of 2013 the company spent $180.0 million toward capital expenditure. Currently, Whirlpool has a negative free cash flow of $373.0 million and anticipates free cash flow in the range of $650.0 million–$700.0 million for 2013.

Buoyed by better-than-expected quarterly results, Whirlpool raised its earnings guidance for 2013. For full-year 2013, Whirlpool now expects earnings in the range of $10.05 – $10.30 per share, raised from the earlier guidance of $9.80 – $10.30. However, considering the impact of restructuring charges, Brazilian tax credits and U.S. Energy Tax Credit, the company now anticipates earnings per share of $9.50 – $10.00, up from the previous forecast of $9.25 – $9.75.

Other Stocks Worth Considering

Currently, Whirlpool carries a Zacks Rank #3 (Hold). The stocks worth a look include Macy’s, Inc. (M - Free Report) and Conns Inc. (CONN - Free Report) . Both the stocks carry a Zacks Rank #1 (Strong Buy).

In-Depth Zacks Research for the Tickers Above

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