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Can Whirlpool's (WHR) Pricing Actions Aid Inflation Woes?
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Whirlpool Corporation (WHR - Free Report) has been affected by the ongoing challenging environment and sluggish demand from rising inflation. The company has been witnessing muted consumer sentiments stemming from inflation and increasing interest rates, along with the ongoing war in Ukraine and unfavorable currency.
The abovementioned headwinds led to drab third-quarter 2022 results, wherein earnings and sales missed the Zacks Consensus Estimate and declined year over year. Adjusted earnings of $4.49 per share declined 32.8% from $6.68 in the year-ago quarter. Net sales of $4,784 million dropped 12.8% from the year-ago quarter.
Excluding the unfavorable impacts of foreign exchange, net sales amounted to $4,957 million, down 9.7% year over year. Lower volumes stemming from weak demand hurt sales, which were partly offset by a favorable product price/mix.
Whirlpool has also been witnessing pressures related to global supply-chain disruptions and rising raw material, freight and logistics costs, as well as energy costs. All these factors marred the company’s margin performance across most regions in the third quarter of 2022.
Whirlpool generated a gross profit of $680 million, down 38.6% from the $1,108 million reported in the year-ago quarter. Adjusted EBIT of $265 million declined 56.4% from $608 million in the year-ago quarter. The adjusted EBIT margin of 5.5% contracted 560 bps year over year.
It also noted that inflation is likely to remain high. Management expects cost inflation to persist throughout the first half of 2023 and expects raw material inflation to hurt its margin by 750 bps in 2022.
For 2022, Whirlpool envisions a net sales decline of 9% to $20.1 billion, which compares unfavorably with the earlier stated $20.7 billion. On a GAAP basis, Whirlpool expects earnings per share (EPS) to be $5, down from the $9.50-$11.50 band mentioned earlier. On an ongoing basis, the metric is likely to be $19, down from the prior-stated $22-$24 band.
Image Source: Zacks Investment Research
Consequently, shares of WHR have risen 3.8% in the past three months, underperforming the industry’s growth of 10%.
Efforts to Counter Hurdles
Whirlpool is on track with early and decisive actions to protect margins and productivity amid ongoing supply-chain constraints and significant inflationary pressures. It has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing a raw material deflation opportunity, effectively managing working capital and syncing the supply chain and labor levels with demand.
This Zacks Rank #3 (Hold) company announced significant cost-based price increases of 5% to 18% in various countries worldwide. The price/mix aided the EBIT margin by 550 bps in the third quarter, led by the execution of pricing actions announced in 2021.
The company remains on track with its long-term targets, with profitable growth of 5-6% and ongoing EBIT margin expansion of 11%-12%. WHR also launched a cost takeout program worth $500 million, which is likely to reduce fixed and variable costs in 2023.
Conclusion
All said, we believe that Whirlpool’s productivity and pricing actions are likely to help offset ongoing supply-chain constraints and significant inflationary pressures. Further, a VGM Score of B reflects its inherent strength.
The Zacks Consensus Estimate for Hilton Grand Vacations’ 2023 sales and EPS indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for RCI Hospitality’s 2023 sales and EPS indicates growth of 12.7% and 10.6%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average.
The Zacks Consensus Estimate for Hyatt’s 2023 sales and EPS indicates a surge of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.
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Can Whirlpool's (WHR) Pricing Actions Aid Inflation Woes?
Whirlpool Corporation (WHR - Free Report) has been affected by the ongoing challenging environment and sluggish demand from rising inflation. The company has been witnessing muted consumer sentiments stemming from inflation and increasing interest rates, along with the ongoing war in Ukraine and unfavorable currency.
The abovementioned headwinds led to drab third-quarter 2022 results, wherein earnings and sales missed the Zacks Consensus Estimate and declined year over year. Adjusted earnings of $4.49 per share declined 32.8% from $6.68 in the year-ago quarter. Net sales of $4,784 million dropped 12.8% from the year-ago quarter.
Excluding the unfavorable impacts of foreign exchange, net sales amounted to $4,957 million, down 9.7% year over year. Lower volumes stemming from weak demand hurt sales, which were partly offset by a favorable product price/mix.
Whirlpool has also been witnessing pressures related to global supply-chain disruptions and rising raw material, freight and logistics costs, as well as energy costs. All these factors marred the company’s margin performance across most regions in the third quarter of 2022.
Whirlpool generated a gross profit of $680 million, down 38.6% from the $1,108 million reported in the year-ago quarter. Adjusted EBIT of $265 million declined 56.4% from $608 million in the year-ago quarter. The adjusted EBIT margin of 5.5% contracted 560 bps year over year.
It also noted that inflation is likely to remain high. Management expects cost inflation to persist throughout the first half of 2023 and expects raw material inflation to hurt its margin by 750 bps in 2022.
For 2022, Whirlpool envisions a net sales decline of 9% to $20.1 billion, which compares unfavorably with the earlier stated $20.7 billion. On a GAAP basis, Whirlpool expects earnings per share (EPS) to be $5, down from the $9.50-$11.50 band mentioned earlier. On an ongoing basis, the metric is likely to be $19, down from the prior-stated $22-$24 band.
Image Source: Zacks Investment Research
Consequently, shares of WHR have risen 3.8% in the past three months, underperforming the industry’s growth of 10%.
Efforts to Counter Hurdles
Whirlpool is on track with early and decisive actions to protect margins and productivity amid ongoing supply-chain constraints and significant inflationary pressures. It has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing a raw material deflation opportunity, effectively managing working capital and syncing the supply chain and labor levels with demand.
This Zacks Rank #3 (Hold) company announced significant cost-based price increases of 5% to 18% in various countries worldwide. The price/mix aided the EBIT margin by 550 bps in the third quarter, led by the execution of pricing actions announced in 2021.
The company remains on track with its long-term targets, with profitable growth of 5-6% and ongoing EBIT margin expansion of 11%-12%. WHR also launched a cost takeout program worth $500 million, which is likely to reduce fixed and variable costs in 2023.
Conclusion
All said, we believe that Whirlpool’s productivity and pricing actions are likely to help offset ongoing supply-chain constraints and significant inflationary pressures. Further, a VGM Score of B reflects its inherent strength.
Stocks to Consider
Some better-ranked stocks from the Zacks Consumer Discretionary sector are Hilton Grand Vacations (HGV - Free Report) , RCI Hospitality Holdings (RICK - Free Report) and Hyatt Hotels (H - Free Report) .
Hilton Grand Vacations currently sports a Zacks Rank #1 (Strong Buy). HGV has a trailing four-quarter earnings surprise of 3.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hilton Grand Vacations’ 2023 sales and EPS indicates a rise of 4.7% and 24.6%, respectively, from the year-ago period’s levels.
RCI Hospitality currently has a Zacks Rank #2 (Buy). RICK has a trailing four-quarter earnings surprise of 6.1%, on average.
The Zacks Consensus Estimate for RCI Hospitality’s 2023 sales and EPS indicates growth of 12.7% and 10.6%, respectively, from the year-ago period’s reported levels.
Hyatt currently has a Zacks Rank #2. H has a trailing four-quarter earnings surprise of 652.3%, on average.
The Zacks Consensus Estimate for Hyatt’s 2023 sales and EPS indicates a surge of 7.4% and 136.6%, respectively, from the year-ago period’s reported levels.