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Whirlpool Corporation (WHR - Free Report) posted second-quarter 2023 results, wherein earnings beat the Zacks Consensus Estimate, while sales missed the same. However, the company’s top and bottom lines declined year over year. Results were impacted by the global demand softness and unfavorable price/mix, offset by cost take-out actions.
However, we note that the company’s sales and earnings improved on a sequential basis, owing to seasonality gains.
We note that shares of Whirlpool declined 1% in the afterhours trading session on Jul 24. This is likely to have resulted from the soft sales performance in the second quarter, driven by soft industry demand trends. Shares of the Zacks Rank #3 (Hold) have gained 16.9% in the past six months compared with the industry’s 15.8% growth.
Image Source: Zacks Investment Research
Q2 Details
The appliance maker reported second-quarter adjusted earnings of $4.21 per share, surpassing the Zacks Consensus Estimate of $3.80. However, the bottom line declined 29.5% from the $5.97 reported in the year-ago quarter. Nonetheless, earnings per share reflected sequential growth of 58.3%, thanks to sequential improvement in the ongoing EBIT margin.
Net sales of $4,792 million missed the Zacks Consensus Estimate of $4,896 million. The top line dropped 6% from the year-ago quarter. Excluding the unfavorable impacts of foreign exchange, net sales amounted to $4,813 million, down 5.6% year over year.
The decline was mainly the result of the normalization of the promotional environment close to the pandemic levels, which was absent in the first half of 2022. However, sales partly benefited from market share growth and the inclusion of InSinkErator. On a sequential basis, sales improved 3.1% due to seasonality gains.
Whirlpool Corporation Price, Consensus and EPS Surprise
The gross profit for second-quarter 2023 was $816 million, down 9% from the $897 million reported in the year-ago quarter.
Ongoing EBIT of $352 million declined 23.6% from $461 million in the year-ago quarter. The ongoing EBIT margin of 7.3% contracted 170 basis points (bps) year over year. On a sequential basis, ongoing EBIT rose 40.2%, with the ongoing EBIT margin expanding 200 bps to 7.3%.
In the quarter, the company’s cost take-out actions delivered a $150-million benefit on a year-over-year basis, driven by negating significant cost inflation from 2021 and 2022. Moreover, the company’s portfolio transformation initiatives, targeting a higher-growth, higher-margin business, remain on track. It is poised to reap gains from the housing-driven demand recovery, as it now has eight of the top 10 national builders as its trade customers.
Regional Performances
Net sales for the North America segment decreased 4.7% year over year but improved 2.8% sequentially to $2,824 million. Excluding currency, net sales declined 4.4% year over year, driven by adverse price/mix, offset by market share gains and the integration of InSinkErator. The segment’s EBIT plunged 30.5% year over year to $290 million, while the EBIT margin contracted 380 bps to 10.3% due to unfavorable price/mix, partially offset by InSinkErator integration and cost take out actions. Sequentially, EBIT improved 5.8% due to favorable industry demand trends and cost take-out actions, offset by an adverse price/mix.
Net sales for the EMEA segment were down 15.3% year over year and 3.9% sequentially to $854 million. Organic sales in the region dipped 11.8% on soft demand trends in Europe, partly negated by favorable price/mix. The segment’s EBIT of $17 million improved significantly from the $2 million reported in the prior-year quarter and $5 million in first-quarter 2023. The EBIT margin of 2% reflected significant growth from the 0.2% reported in the prior-year quarter, mainly benefiting from cost take out actions and assets held for sale.
Net sales from Latin America rose 4.1% year over year and 8.2% sequentially to $819 million. Excluding currency, the segment’s sales rose 4.6% year over year due to market share gains and favorable demand trends in Mexico. The segment’s EBIT of $53 million declined 7% year over year and improved 35.9% sequentially. The EBIT margin contracted 70 bps year over year to 6.5%, mainly affected by cost inflation and increased volumes.
Net sales in Asia fell 12.7% year over year and rose 15.2% sequentially to $295 million. Excluding the currency impacts, sales for the region were down 8% mainly as market share gains were offset by soft demand trends. The segment’s EBIT of $11 million reflected a 52.2% plunge from the $23 million reported in the year-ago quarter. The segment’s EBIT margin of 3.7% contracted 310 bps from the prior-year quarter due to the adverse price/mix, partly negated by cost take out actions. On a sequential basis, EBIT improved 37.5%, with the EBIT margin expanding 60 bps.
Other Financial Details
As of Jun 30, 2023, the company had cash and cash equivalents of $1,309 million, long-term debt of $6,393 million, and stockholders’ equity of $2,018 million, excluding non-controlling interests of $175 million.
As of Jun 30, 2023, Whirlpool used cash of $370 million from operating activities. It reported a free cash outflow of $587 million. WHR incurred a capital expenditure of $217 million in the same period.
The company returned $193 million in cash to shareholders as dividends in the first half of 2023.
Outlook
For 2023, Whirlpool reaffirmed its expectations for 2023 sales and earnings per share. It forecasts net sales of $19.4 billion for 2023, suggesting a 1-2% decline from the prior-year actual. On a GAAP and ongoing basis, Whirlpool expects earnings per share of $13.00-$15.00 and $16.00-$18.00, respectively.
Management anticipates a GAAP tax rate of 15-20% for 2023 compared with the 19-21% mentioned earlier. The adjusted tax rate is expected to be 10-15% for 2023 compared with the 14-16% stated earlier.
For 2023, Whirlpool expects cash provided by operating activities of $1.4 billion and a free cash flow of $800 million.
Management is on track with its cost take-out actions and expects $800-$900 million cost take-out related to gains from the ongoing measures and eased raw material inflation.
3 Better-Ranked Picks
Some better-ranked stocks in the broader Consumer Discretionary sector are GIII Apparel Group (GIII - Free Report) , lululemon athletica (LULU - Free Report) and Carter's (CRI - Free Report) .
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 1.9% and 0.4%, respectively, from the year-ago quarter’s reported numbers.
lululemon currently carries a Zacks Rank of 2 (Buy). LULU has a trailing four-quarter earnings surprise of 9.9%, on average. It has a long-term earnings growth rate of 20% over the next three to five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17.1% and 18.4%, respectively, from the prior-year quarter’s reported numbers.
Carter's currently carries a Zacks Rank of 2. CRI has a trailing four-quarter earnings surprise of 25.3%, on average.
The Zacks Consensus Estimate for Carter's current financial-year sales and earnings suggests declines of 6.6% and 10.9%, respectively, from the year-ago quarter’s reported figures.
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Whirlpool (WHR) Stock Slides as Demand Hurt Q2 Earnings & Sales
Whirlpool Corporation (WHR - Free Report) posted second-quarter 2023 results, wherein earnings beat the Zacks Consensus Estimate, while sales missed the same. However, the company’s top and bottom lines declined year over year. Results were impacted by the global demand softness and unfavorable price/mix, offset by cost take-out actions.
However, we note that the company’s sales and earnings improved on a sequential basis, owing to seasonality gains.
We note that shares of Whirlpool declined 1% in the afterhours trading session on Jul 24. This is likely to have resulted from the soft sales performance in the second quarter, driven by soft industry demand trends. Shares of the Zacks Rank #3 (Hold) have gained 16.9% in the past six months compared with the industry’s 15.8% growth.
Image Source: Zacks Investment Research
Q2 Details
The appliance maker reported second-quarter adjusted earnings of $4.21 per share, surpassing the Zacks Consensus Estimate of $3.80. However, the bottom line declined 29.5% from the $5.97 reported in the year-ago quarter. Nonetheless, earnings per share reflected sequential growth of 58.3%, thanks to sequential improvement in the ongoing EBIT margin.
Net sales of $4,792 million missed the Zacks Consensus Estimate of $4,896 million. The top line dropped 6% from the year-ago quarter. Excluding the unfavorable impacts of foreign exchange, net sales amounted to $4,813 million, down 5.6% year over year.
The decline was mainly the result of the normalization of the promotional environment close to the pandemic levels, which was absent in the first half of 2022. However, sales partly benefited from market share growth and the inclusion of InSinkErator. On a sequential basis, sales improved 3.1% due to seasonality gains.
Whirlpool Corporation Price, Consensus and EPS Surprise
Whirlpool Corporation price-consensus-eps-surprise-chart | Whirlpool Corporation Quote
The gross profit for second-quarter 2023 was $816 million, down 9% from the $897 million reported in the year-ago quarter.
Ongoing EBIT of $352 million declined 23.6% from $461 million in the year-ago quarter. The ongoing EBIT margin of 7.3% contracted 170 basis points (bps) year over year. On a sequential basis, ongoing EBIT rose 40.2%, with the ongoing EBIT margin expanding 200 bps to 7.3%.
In the quarter, the company’s cost take-out actions delivered a $150-million benefit on a year-over-year basis, driven by negating significant cost inflation from 2021 and 2022. Moreover, the company’s portfolio transformation initiatives, targeting a higher-growth, higher-margin business, remain on track. It is poised to reap gains from the housing-driven demand recovery, as it now has eight of the top 10 national builders as its trade customers.
Regional Performances
Net sales for the North America segment decreased 4.7% year over year but improved 2.8% sequentially to $2,824 million. Excluding currency, net sales declined 4.4% year over year, driven by adverse price/mix, offset by market share gains and the integration of InSinkErator. The segment’s EBIT plunged 30.5% year over year to $290 million, while the EBIT margin contracted 380 bps to 10.3% due to unfavorable price/mix, partially offset by InSinkErator integration and cost take out actions. Sequentially, EBIT improved 5.8% due to favorable industry demand trends and cost take-out actions, offset by an adverse price/mix.
Net sales for the EMEA segment were down 15.3% year over year and 3.9% sequentially to $854 million. Organic sales in the region dipped 11.8% on soft demand trends in Europe, partly negated by favorable price/mix. The segment’s EBIT of $17 million improved significantly from the $2 million reported in the prior-year quarter and $5 million in first-quarter 2023. The EBIT margin of 2% reflected significant growth from the 0.2% reported in the prior-year quarter, mainly benefiting from cost take out actions and assets held for sale.
Net sales from Latin America rose 4.1% year over year and 8.2% sequentially to $819 million. Excluding currency, the segment’s sales rose 4.6% year over year due to market share gains and favorable demand trends in Mexico. The segment’s EBIT of $53 million declined 7% year over year and improved 35.9% sequentially. The EBIT margin contracted 70 bps year over year to 6.5%, mainly affected by cost inflation and increased volumes.
Net sales in Asia fell 12.7% year over year and rose 15.2% sequentially to $295 million. Excluding the currency impacts, sales for the region were down 8% mainly as market share gains were offset by soft demand trends. The segment’s EBIT of $11 million reflected a 52.2% plunge from the $23 million reported in the year-ago quarter. The segment’s EBIT margin of 3.7% contracted 310 bps from the prior-year quarter due to the adverse price/mix, partly negated by cost take out actions. On a sequential basis, EBIT improved 37.5%, with the EBIT margin expanding 60 bps.
Other Financial Details
As of Jun 30, 2023, the company had cash and cash equivalents of $1,309 million, long-term debt of $6,393 million, and stockholders’ equity of $2,018 million, excluding non-controlling interests of $175 million.
As of Jun 30, 2023, Whirlpool used cash of $370 million from operating activities. It reported a free cash outflow of $587 million. WHR incurred a capital expenditure of $217 million in the same period.
The company returned $193 million in cash to shareholders as dividends in the first half of 2023.
Outlook
For 2023, Whirlpool reaffirmed its expectations for 2023 sales and earnings per share. It forecasts net sales of $19.4 billion for 2023, suggesting a 1-2% decline from the prior-year actual. On a GAAP and ongoing basis, Whirlpool expects earnings per share of $13.00-$15.00 and $16.00-$18.00, respectively.
Management anticipates a GAAP tax rate of 15-20% for 2023 compared with the 19-21% mentioned earlier. The adjusted tax rate is expected to be 10-15% for 2023 compared with the 14-16% stated earlier.
For 2023, Whirlpool expects cash provided by operating activities of $1.4 billion and a free cash flow of $800 million.
Management is on track with its cost take-out actions and expects $800-$900 million cost take-out related to gains from the ongoing measures and eased raw material inflation.
3 Better-Ranked Picks
Some better-ranked stocks in the broader Consumer Discretionary sector are GIII Apparel Group (GIII - Free Report) , lululemon athletica (LULU - Free Report) and Carter's (CRI - Free Report) .
GIII Apparel has a trailing four-quarter earnings surprise of 47.4%, on average. GIII currently sports a Zacks Rank #1 (Strong Buy). 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 1.9% and 0.4%, respectively, from the year-ago quarter’s reported numbers.
lululemon currently carries a Zacks Rank of 2 (Buy). LULU has a trailing four-quarter earnings surprise of 9.9%, on average. It has a long-term earnings growth rate of 20% over the next three to five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17.1% and 18.4%, respectively, from the prior-year quarter’s reported numbers.
Carter's currently carries a Zacks Rank of 2. CRI has a trailing four-quarter earnings surprise of 25.3%, on average.
The Zacks Consensus Estimate for Carter's current financial-year sales and earnings suggests declines of 6.6% and 10.9%, respectively, from the year-ago quarter’s reported figures.