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Whirlpool Grows on Strategic Innovations: Time to Hold?

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Shares of Whirlpool Corporation (WHR - Free Report) have climbed roughly 24% on a year-to-date basis, notably outperforming the Zacks categorized Consumer Discretionary sector‘s growth of 7%. In addition, the company’s innovation strategy, which helps it to tap additional sales and gain market share, is boding well. However, the stock is not devoid of challenges. Let’s delve deeper to find more.



Growth Drivers

Whirlpool is among the few companies, heavily investing in technologies, to produce differentiated products, in a bid to suit the needs of their end consumers. Though the company appears to be mostly dependent on the North American region for its revenues, it has been fortifying its presence in other parts of the world as well. Further, it has been undertaking various acquisitions and integrating these into its business.

In an attempt to achieve growth via expansion, the world’s leading home appliances manufacturer is striving to undertake innovations in fields different from its key appliance business. Some of the recent activities include commencing the construction of the Marion Wind Project, expansion in Argentina with a new production unit and construction of a new distribution channel in New Kingston, among others. We expect these diversification initiatives to aid the company in eliminating risks arising from concentration in one area.

This apart, Whirlpool has also been striving to improve its margins through a series of measures, including cost-based price increments and cost-reduction initiatives focused on improving business efficiency. The company is leveraging on its new product launches to drive consumer demand. This, in turn, is anticipated to lead to better price mix and increased volumes, moving ahead. These actions are likely to combat the adverse currency pressures as well as deliver improved margins.

Hurdles/Challenges

However, Whirlpool continues to feel the pinch of lingering currency headwinds and soft appliance demand in the U.S. and UK. These factors, along with further devaluation of the British Pound stemmed by Brexit, led the company to narrow its earnings guidance for 2016, following the dreary third-quarter results. It expects 2016 adjusted earnings in the range of $14.00–$14.25 per share, versus $14.25–$14.75, projected earlier.

WHIRLPOOL CORP Price and Consensus

WHIRLPOOL CORP Price and Consensus | WHIRLPOOL CORP Quote

Moreover, the company’s top line has missed the Zacks Consensus Estimate in six out of seven straight quarters. Further, it remains vulnerable to the risks of operating in global markets and high customer concentration. Also, volatility in commodity prices may adversely affect the company’s operating performance.

Zacks Rank

Whirlpool currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the Consumer Discretionary sector include Central Garden & Pet Company (CENT - Free Report) , Caleres, Inc. (CAL - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Central Garden & Pet, with a long-term earnings growth rate of 10%, has skyrocketed 148.2% year to date.

Caleres, with a long-term earnings growth rate of 11%, has gained 46.7% in the past six months.

Choice Hotels, with a long-term earnings growth rate of 5.3%, has increased 25.9% in the past three months.

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