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Can Whirlpool's (WHR) Cost-Based Pricing Actions Aid Stock?
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Whirlpool Corporation (WHR - Free Report) has been on track with its cost-based pricing actions to offset raw material inflation, which has been aiding the bottom line. Driven by the cost-based pricing efforts and strong demand, the company delivered the 15th straight quarter of earnings beat in first-quarter 2022. Backed by these actions, the company looks poised to navigate the industry’s ongoing challenges and deliver strong performance in the forthcoming periods.
However, we cannot ignore the inflationary pressures, which are likely to continue through 2022. The company expects inflationary pressures to significantly hurt its performance in 2022.
Although Whirlpool’s shares have lost 7.9% in the past three months, it fared better than the industry’s decline of 9.8%. The stock performance also compared favorably with the sector’s 19.1% decline and S&P 500’s 11.2% fall.
The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s current financial year’s sales suggests growth of 0.7% from the year-ago period’s reported number, while earnings estimates indicate a decline of 6.5%.
Image Source: Zacks Investment Research
Cost-Based Pricing Efforts
Whirlpool is on track with early and decisive actions to protect margins and productivity amid the ongoing supply-chain constraints and significant inflationary pressures. It has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing raw material deflation opportunities, effectively managing working capital, and syncing supply chain and labor levels with demand. It announced significant cost-based price increases of 5-18% in various countries across the globe.
Price/mix aided the EBIT margin by 600 basis points (bps) in the first quarter, led by the execution of the pricing actions announced in 2021. Segment-wise, the company generated strong margin growth of more than 16% in North America, driven by gains from cost-based pricing actions, which are likely to mostly offset inflation and operational efficiencies related to producing in a heavily constrained environment. Despite the ongoing inflation, the EBIT margin grew 7.1% in Latin America. Also, the EBIT margin rose 4.8% on cost-based pricing actions, partly offset by a decline in revenues and inflation.
Management expects EBIT margins of 9.5% for 2022. The price mix of 725 bps is likely to aid the EBIT margin, driven by an increase of 125 bps, stemming from additional price increases. Segment-wise, the EBIT margin in North America is anticipated to grow 16%, while the metric is likely to remain flat year over year. In Latin America and Asia, EBIT margins are expected to rise 7% and 6%, respectively.
Financial Flexibility
Whirlpool looks financially stable, with no current maturities of long-term debt, and enough cash and cash equivalents to meet any obligations. The company expects capital investments of $700 million for 2022, as it continues to invest in products and fund organic growth. As part of its long-term value creation goals, the company expected an adjusted free cash flow, as a percentage of net sales, of 7-8% annually. Return on invested capital is expected to be 15-16% year over year on a long-term basis.
Whirlpool regularly returns value through higher dividends and share buybacks, and reinvests greatly in its business. In the first quarter, it bought back $533 million of shares and raised the share repurchase authorization by $2 billion. Whirlpool had $2.9 billion available for buybacks. Driven by the strong balance sheet and cash flow projections, the company expects to return $1.5 billion to shareholders in 2022 through dividend payouts and share repurchases.
Whirlpool recently announced its 10th straight quarterly dividend hike. It will now pay $1.75 per share, suggesting a 25% rise from the prior dividend rate of $1.40. The increased dividend will be paid out on Mar 15 to shareholders of record as of Feb 25.
Supply-Chain Woes to Hurt
Whirlpool, like others in the industry, has been witnessing pressures related to global supply-chain disruptions and rising raw material costs. Supply-chain disruptions have resulted in higher freight costs. All these factors marred the company’s margin performance across most regions in first-quarter 2022. The adjusted EBIT margin of 9.4% fell 300 bps year over year due to higher inflation of $400 million.
Segment-wise, the EBIT margin contracted 360 bps in North America, 30 bps in Asia and 140 bps in Latin America, affected by inflation and supply-chain headwinds, somewhat offset by cost-based price increases. The EMEA segment reported an EBIT loss of $27 million against an EBIT of $21 million.
The company expects the inefficiencies across the supply chain, particularly in distribution and labor, to continue. It also continues to monitor the global cost inflation, largely in steel and resins, which is likely to remain a headwind. The company expects inflationary pressures to significantly impact the 2022 results.
Whirlpool anticipates net cost takeout to negatively impact margins by 250 bps in 2022, as a result of increased logistics and labor costs stemming from the Russia-Ukraine conflict. Management expects raw material inflation to hurt its margin by 700 bps and its business by $1.5-$1.75 billion in 2022, led by higher component and resin costs.
Looking for Better-Ranked Stocks? Check These
We have highlighted three better-ranked companies in the same industry, namely GIII Apparel Group (GIII - Free Report) , Oxford Industries (OXM - Free Report) and lululemon athletica (LULU - Free Report) .
GIII Apparel currently flaunts a Zacks Rank #1 (Strong Buy). GIII has a trailing four-quarter earnings surprise of 97.5%, on average. Shares of GIII have declined 26.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel's current financial-year sales and earnings suggests growth of 12.9% and 10.4%, respectively, from the year-ago period's reported figures.
Oxford Industries currently sports a Zacks Rank of 1. OXM has a trailing four-quarter earnings surprise of 99.7%, on average. Shares of OXM have declined 2.8% in the past three months.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and EPS suggests growth of 14.5% and 23.7%, respectively, from the year-ago period's reported numbers.
lululemon carries a Zacks Rank #2 (Buy) at present. Shares of LULU have declined 22% in the past three months. The company has a trailing four-quarter earnings surprise of 14.9%, on average. The company has a long-term earnings growth rate of 20%.
The Zacks Consensus Estimate for lululemon’s current-year sales and EPS suggests growth of 23.1% and 21.6%, respectively, from the year-ago reported figures.
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Can Whirlpool's (WHR) Cost-Based Pricing Actions Aid Stock?
Whirlpool Corporation (WHR - Free Report) has been on track with its cost-based pricing actions to offset raw material inflation, which has been aiding the bottom line. Driven by the cost-based pricing efforts and strong demand, the company delivered the 15th straight quarter of earnings beat in first-quarter 2022. Backed by these actions, the company looks poised to navigate the industry’s ongoing challenges and deliver strong performance in the forthcoming periods.
However, we cannot ignore the inflationary pressures, which are likely to continue through 2022. The company expects inflationary pressures to significantly hurt its performance in 2022.
Although Whirlpool’s shares have lost 7.9% in the past three months, it fared better than the industry’s decline of 9.8%. The stock performance also compared favorably with the sector’s 19.1% decline and S&P 500’s 11.2% fall.
The Zacks Consensus Estimate for the Zacks Rank #3 (Hold) company’s current financial year’s sales suggests growth of 0.7% from the year-ago period’s reported number, while earnings estimates indicate a decline of 6.5%.
Image Source: Zacks Investment Research
Cost-Based Pricing Efforts
Whirlpool is on track with early and decisive actions to protect margins and productivity amid the ongoing supply-chain constraints and significant inflationary pressures. It has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing raw material deflation opportunities, effectively managing working capital, and syncing supply chain and labor levels with demand. It announced significant cost-based price increases of 5-18% in various countries across the globe.
Price/mix aided the EBIT margin by 600 basis points (bps) in the first quarter, led by the execution of the pricing actions announced in 2021. Segment-wise, the company generated strong margin growth of more than 16% in North America, driven by gains from cost-based pricing actions, which are likely to mostly offset inflation and operational efficiencies related to producing in a heavily constrained environment. Despite the ongoing inflation, the EBIT margin grew 7.1% in Latin America. Also, the EBIT margin rose 4.8% on cost-based pricing actions, partly offset by a decline in revenues and inflation.
Management expects EBIT margins of 9.5% for 2022. The price mix of 725 bps is likely to aid the EBIT margin, driven by an increase of 125 bps, stemming from additional price increases. Segment-wise, the EBIT margin in North America is anticipated to grow 16%, while the metric is likely to remain flat year over year. In Latin America and Asia, EBIT margins are expected to rise 7% and 6%, respectively.
Financial Flexibility
Whirlpool looks financially stable, with no current maturities of long-term debt, and enough cash and cash equivalents to meet any obligations. The company expects capital investments of $700 million for 2022, as it continues to invest in products and fund organic growth. As part of its long-term value creation goals, the company expected an adjusted free cash flow, as a percentage of net sales, of 7-8% annually. Return on invested capital is expected to be 15-16% year over year on a long-term basis.
Whirlpool regularly returns value through higher dividends and share buybacks, and reinvests greatly in its business. In the first quarter, it bought back $533 million of shares and raised the share repurchase authorization by $2 billion. Whirlpool had $2.9 billion available for buybacks. Driven by the strong balance sheet and cash flow projections, the company expects to return $1.5 billion to shareholders in 2022 through dividend payouts and share repurchases.
Whirlpool recently announced its 10th straight quarterly dividend hike. It will now pay $1.75 per share, suggesting a 25% rise from the prior dividend rate of $1.40. The increased dividend will be paid out on Mar 15 to shareholders of record as of Feb 25.
Supply-Chain Woes to Hurt
Whirlpool, like others in the industry, has been witnessing pressures related to global supply-chain disruptions and rising raw material costs. Supply-chain disruptions have resulted in higher freight costs. All these factors marred the company’s margin performance across most regions in first-quarter 2022. The adjusted EBIT margin of 9.4% fell 300 bps year over year due to higher inflation of $400 million.
Segment-wise, the EBIT margin contracted 360 bps in North America, 30 bps in Asia and 140 bps in Latin America, affected by inflation and supply-chain headwinds, somewhat offset by cost-based price increases. The EMEA segment reported an EBIT loss of $27 million against an EBIT of $21 million.
The company expects the inefficiencies across the supply chain, particularly in distribution and labor, to continue. It also continues to monitor the global cost inflation, largely in steel and resins, which is likely to remain a headwind. The company expects inflationary pressures to significantly impact the 2022 results.
Whirlpool anticipates net cost takeout to negatively impact margins by 250 bps in 2022, as a result of increased logistics and labor costs stemming from the Russia-Ukraine conflict. Management expects raw material inflation to hurt its margin by 700 bps and its business by $1.5-$1.75 billion in 2022, led by higher component and resin costs.
Looking for Better-Ranked Stocks? Check These
We have highlighted three better-ranked companies in the same industry, namely GIII Apparel Group (GIII - Free Report) , Oxford Industries (OXM - Free Report) and lululemon athletica (LULU - Free Report) .
GIII Apparel currently flaunts a Zacks Rank #1 (Strong Buy). GIII has a trailing four-quarter earnings surprise of 97.5%, on average. Shares of GIII have declined 26.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel's current financial-year sales and earnings suggests growth of 12.9% and 10.4%, respectively, from the year-ago period's reported figures.
Oxford Industries currently sports a Zacks Rank of 1. OXM has a trailing four-quarter earnings surprise of 99.7%, on average. Shares of OXM have declined 2.8% in the past three months.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and EPS suggests growth of 14.5% and 23.7%, respectively, from the year-ago period's reported numbers.
lululemon carries a Zacks Rank #2 (Buy) at present. Shares of LULU have declined 22% in the past three months. The company has a trailing four-quarter earnings surprise of 14.9%, on average. The company has a long-term earnings growth rate of 20%.
The Zacks Consensus Estimate for lululemon’s current-year sales and EPS suggests growth of 23.1% and 21.6%, respectively, from the year-ago reported figures.