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Whirlpool (WHR) Exhibits Bright Prospects Despite Headwinds

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Whirlpool Corporation (WHR - Free Report) has been benefiting from the U.S. homebuilding market recovery, which is expected to boost its product demand in the quarters ahead. The company’s cost reduction initiatives, improved supply chains, stabilized inventories, strong consumer demand in Mexico and solid market share are also likely to act as tailwinds.

The company remains on track with its long-term targets, with profitable growth of 5-6% and ongoing EBIT margin expansion of 11%-12%. It remains focused on protecting margins and productivity amid supply chain constraints.

Whirlpool launched a cost takeout program worth $500 million that is likely to reduce fixed and variable costs in 2023. 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.

WHR also remains focused on rewarding its shareholders through share buyback programs and dividend payouts. In the first half of 2023, the company paid dividends worth $193 million to its shareholders. Exiting the second quarter of 2023, it had $2.6 billion remaining as share repurchase authorization.

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Shares of this Zacks Rank #3 (Hold) company have gained 5.5% in the past six months, almost in line with the industry’s growth of 5.6%.

Despite the positives, the company has been grappling with a challenging operating environment and sluggish global demand amid high inflation. In the second quarter, the company’s net sales dropped 6% to $4,792 million from the year-ago quarter. For 2023, net sales are envisioned to be $19.4 billion, suggesting a 1-2% decline from the prior-year figure.

WHR’s high-debt profile also remains a concern, raising financial obligations and draining profitability. The company exited the second quarter with long-term debt of $6,393 million, up 32.3% on a year-over-year basis. Its debt load appears too high to be managed by its cash and cash equivalents of $1,309 million as of Jun 30, 2023.

Stocks to Consider

Some better-ranked companies in the consumer discretionary sector are Royal Caribbean (RCL - Free Report) , GIII Apparel Group (GIII - Free Report) and Alto Ingredients (ALTO - Free Report) .

Royal Caribbean sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

RCL delivered a trailing four-quarter earnings surprise of 28.5%, on average. The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates growth of 54.5% and 180.1%, respectively, from the 2022 reported numbers.

GIII Apparel flaunts a Zacks Rank #1 at present. It delivered a trailing four-quarter earnings surprise of 526.6%, on average. The Zacks Consensus Estimate for GIII’s current fiscal year sales and EPS implies growth of 7.9% and 11.6%, respectively, year over year.

Alto Ingredients has a Zacks Rank #2 (Buy) at present. ALTO delivered an earnings surprise of 242.9% in the last reported quarter. The Zacks Consensus Estimate for ALTO’s upcoming quarter’s EPS indicates growth of 125% from the previous year’s reported figure.

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