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Can Whirlpool's (WHR) Growth Initiatives Help Drive Its Stock?
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Whirlpool Corporation (WHR - Free Report) has been witnessing a challenging macro environment and sluggish demand from rising inflation. The company has been witnessing muted consumer sentiments from inflation and increasing interest rates, along with the ongoing war in Ukraine and unfavorable currency.
Global supply-chain disruptions and rising raw material costs also continue to hurt Whirlpool’s performance. The company has been witnessing elevated raw materials, freight and logistic costs, as well as energy costs. All these factors marred its margin performance across most regions in first-quarter 2023.
Whirlpool’s gross profit declined 10.3% year over year in first-quarter 2023. Ongoing EBIT fell 45.8% from the year-ago quarter. The ongoing EBIT margin of 5.4% contracted 400 basis points (bps) year over year.
Despite the earnings and sales beat in first-quarter 2023, both metrics declined year over year. Results were impacted by the global demand softness, and an unfavorable mix of product and price. Adjusted earnings declined 49.9% year over year, whereas net sales fell 5.5% from the year-ago quarter.
Management reaffirmed its expectations for 2023 net sales of $19.4 billion, reflecting a 1-2% decline from that reported in the prior year. The view is also in line with our estimate. On a GAAP and ongoing basis, Whirlpool downgraded its earnings per share expectation to $13-$15 from the previously disclosed $16-$18. However, it reaffirmed ongoing earnings per diluted share of $16-$18.
The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s current financial year’s sales and earnings suggests declines of 1.7% and 16.4%, respectively, from the year-ago period’s reported numbers.
The company’s high debt levels concern investors. Whirlpool ended the first quarter with a long-term debt of $7,382 million, up 0.3% on a sequential basis. Its debt-to-capitalization ratio of 0.78 at the end of the first quarter compares unfavorably with 0.75 at the end of the preceding quarter.
The company’s debt load appears too high to be managed by its cash and cash equivalents of $1,359 million as of Mar 31, 2023.
Can Growth Efforts Save the Day?
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 its supply chain and labor levels with demand. It announced significant cost-based price increases of 5-18% in various countries across the globe.
The company is on track with its long-term targets, with profitable growth of 5-6% and ongoing EBIT margin expansion of 11-12%. It also launched a cost takeout program worth $500 million, which is likely to reduce fixed and variable costs in 2023.
Keeping in these lines, management is on track with its cost takeout actions, and expects $800-$900 million related to gains from the aforementioned measures and eased raw material inflation. The company expects to generate $500 million in net cost takeout actions via premium cost reductions of more than $250 million and supply-chain inefficiencies. Also, it cut its current global salaried workforce by 4%.
Whirlpool recently concluded the strategic review of its EMEA segment. As part of this, the company’s Europe major domestic appliance business will form an entity with Arçelik. The deal is expected to close in the second half of 2023.
The new company is likely to generate more than €6 billion in annual sales and above €200 million in cost synergies. WHR retained the ownership of its EMEA KitchenAid business, which forms part of the small appliance business. It is progressing with the integration efforts of its latest buyout of InSinkErator and has been on track with sustained EBIT margins of above 20%. This buyout is expected to add 50 basis points to WHR’s consolidated EBIT margins.
Image Source: Zacks Investment Research
The Whirlpool stock has rallied 9.4% in the past three months compared with the industry’s and the Consumer Discretionary sector’s growth of 8.2% and 5.2%, respectively.
GIII Apparel has an expected EPS growth rate of 15% for three to five years. GIII has a trailing four-quarter negative earnings surprise of 47.4%, on average. Shares of GIII have rallied 30.3% in the past three months.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales suggests growth of 1.4% from the year-ago period’s reported figures. GIII currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Skechers currently sports a Zacks Rank #1. SKX has a trailing four-quarter earnings surprise of 18.8%, on average. Shares of the company have rallied 22.5% in the past three months.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings suggests growth of 7.8% and 31.9%, respectively, from the year-ago period’s reported figures.
lululemon has a trailing four-quarter earnings surprise of 9.9%, on average. It currently carries a Zacks Rank #2 (Buy). Shares of LULU have gained 24.8% in the past three months.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17% and 18.1%, respectively, from the year-ago period's reported figures. LULU has an expected EPS growth rate of 20% for three to five years.
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Can Whirlpool's (WHR) Growth Initiatives Help Drive Its Stock?
Whirlpool Corporation (WHR - Free Report) has been witnessing a challenging macro environment and sluggish demand from rising inflation. The company has been witnessing muted consumer sentiments from inflation and increasing interest rates, along with the ongoing war in Ukraine and unfavorable currency.
Global supply-chain disruptions and rising raw material costs also continue to hurt Whirlpool’s performance. The company has been witnessing elevated raw materials, freight and logistic costs, as well as energy costs. All these factors marred its margin performance across most regions in first-quarter 2023.
Whirlpool’s gross profit declined 10.3% year over year in first-quarter 2023. Ongoing EBIT fell 45.8% from the year-ago quarter. The ongoing EBIT margin of 5.4% contracted 400 basis points (bps) year over year.
Despite the earnings and sales beat in first-quarter 2023, both metrics declined year over year. Results were impacted by the global demand softness, and an unfavorable mix of product and price. Adjusted earnings declined 49.9% year over year, whereas net sales fell 5.5% from the year-ago quarter.
Management reaffirmed its expectations for 2023 net sales of $19.4 billion, reflecting a 1-2% decline from that reported in the prior year. The view is also in line with our estimate. On a GAAP and ongoing basis, Whirlpool downgraded its earnings per share expectation to $13-$15 from the previously disclosed $16-$18. However, it reaffirmed ongoing earnings per diluted share of $16-$18.
The Zacks Consensus Estimate for this Zacks Rank #3 (Hold) company’s current financial year’s sales and earnings suggests declines of 1.7% and 16.4%, respectively, from the year-ago period’s reported numbers.
The company’s high debt levels concern investors. Whirlpool ended the first quarter with a long-term debt of $7,382 million, up 0.3% on a sequential basis. Its debt-to-capitalization ratio of 0.78 at the end of the first quarter compares unfavorably with 0.75 at the end of the preceding quarter.
The company’s debt load appears too high to be managed by its cash and cash equivalents of $1,359 million as of Mar 31, 2023.
Can Growth Efforts Save the Day?
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 its supply chain and labor levels with demand. It announced significant cost-based price increases of 5-18% in various countries across the globe.
The company is on track with its long-term targets, with profitable growth of 5-6% and ongoing EBIT margin expansion of 11-12%. It also launched a cost takeout program worth $500 million, which is likely to reduce fixed and variable costs in 2023.
Keeping in these lines, management is on track with its cost takeout actions, and expects $800-$900 million related to gains from the aforementioned measures and eased raw material inflation. The company expects to generate $500 million in net cost takeout actions via premium cost reductions of more than $250 million and supply-chain inefficiencies. Also, it cut its current global salaried workforce by 4%.
Whirlpool recently concluded the strategic review of its EMEA segment. As part of this, the company’s Europe major domestic appliance business will form an entity with Arçelik. The deal is expected to close in the second half of 2023.
The new company is likely to generate more than €6 billion in annual sales and above €200 million in cost synergies. WHR retained the ownership of its EMEA KitchenAid business, which forms part of the small appliance business. It is progressing with the integration efforts of its latest buyout of InSinkErator and has been on track with sustained EBIT margins of above 20%. This buyout is expected to add 50 basis points to WHR’s consolidated EBIT margins.
Image Source: Zacks Investment Research
The Whirlpool stock has rallied 9.4% in the past three months compared with the industry’s and the Consumer Discretionary sector’s growth of 8.2% and 5.2%, respectively.
Stocks to Focus
Some better-ranked Consumer Discretionary stocks are GIII Apparel Group (GIII - Free Report) , Skechers (SKX - Free Report) and lululemon athletica (LULU - Free Report) .
GIII Apparel has an expected EPS growth rate of 15% for three to five years. GIII has a trailing four-quarter negative earnings surprise of 47.4%, on average. Shares of GIII have rallied 30.3% in the past three months.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales suggests growth of 1.4% from the year-ago period’s reported figures. GIII currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Skechers currently sports a Zacks Rank #1. SKX has a trailing four-quarter earnings surprise of 18.8%, on average. Shares of the company have rallied 22.5% in the past three months.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings suggests growth of 7.8% and 31.9%, respectively, from the year-ago period’s reported figures.
lululemon has a trailing four-quarter earnings surprise of 9.9%, on average. It currently carries a Zacks Rank #2 (Buy). Shares of LULU have gained 24.8% in the past three months.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17% and 18.1%, respectively, from the year-ago period's reported figures. LULU has an expected EPS growth rate of 20% for three to five years.