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Will Near-Term Challenges Mar Whirlpool's (WHR) Q3 Earnings?

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Whirlpool Corp. (WHR - Free Report) is slated to release third-quarter 2017 results on Oct 23, after the closing bell. Last quarter, the company posted a negative earnings surprise of 6.9%.

In fact, Whirlpool has reported negative surprise in the last four quarters, with an average miss of 5.8%. Let’s see how things are shaping up for this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Whirlpool will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $3.99, reflecting a year-over-year increase of 8.9%. We note that the Zacks Consensus Estimate has been stable ahead of the earnings release. Analysts polled by Zacks expect revenues of $5.5 billion, up 4.9% from the year-ago quarter.

Whirlpool Corporation Price, Consensus and EPS Surprise

Whirlpool Corporation Price, Consensus and EPS Surprise | Whirlpool Corporation Quote

Moreover, we note that the stock has outperformed the broader industry in the past month. The company’s shares have increased 3.1%, while the industry dipped 10.5%.

Factors at Play

Whirlpool’s surprise history remains unimpressive as it posted fourth consecutive negative surprise in second-quarter 2017. Further, we believe that volatility in commodity prices, particularly steel, may adversely affect operating performance. This was clearly reflected in Whirlpool’s second-quarter results which were hurt by raw material cost inflation. The company notes that costs of key raw materials, particularly steel and resins have increased worldwide in the first half of 2017.

While these headwinds were fully offset in North America and Latin America due to favorable demand and productivity gains, Europe and Asia suffered as soft demand made it difficult to negate the challenges.

Not surprisingly, the company slashed  earnings guidance for 2017 due to higher raw material costs and lower product price/mix in China and Europe. It now envisions adjusted earnings in the range of $14.50-$15.00 per share compared with $14.7-$15.50, guided earlier.

However, Whirlpool has been riding on its innovation strategy that helps it to tap additional sales and gain market share. Moreover, the company's solid integration and cost-productivity activities have been enhancing performance. These factors, along with its robust brands portfolio, and continued strength across North America and Latin America have been growth drivers.

While Whirlpool’s long-term plans and solid brands portfolio reflect strength, we cannot ignore the near-term challenges hurting the results. That said, let’s wait and see if the company’s strategic efforts can aid in sustaining the stock momentum.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Whirlpool is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Whirlpool has an Earnings ESP of -5.90% as the Most Accurate estimate of $3.75 is pegged lower than the Zacks Consensus Estimate of $3.99 per share. Moreover, the company’s Zacks Rank #4 (Sell) lowers the chances of a beat in the ensuing release. We caution against stocks with Zacks Rank #4 and #5 (Strong Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Ralph Lauren Corp. (RL - Free Report) has an Earnings ESP of +2.63% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Procter & Gamble Company (PG - Free Report) currently has an Earnings ESP of +0.77% and a Zacks Rank #3.

Colgate-Palmolive Co. (CL - Free Report) currently has an Earnings ESP of +0.55% and a Zacks Rank #3.

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