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Whirlpool Dips to a 52-Week Low, Input Costs a Major Concern
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Shares of Whirlpool Corporation (WHR - Free Report) touched a 52-week low of $121.12, before closing the session a tad higher at $122.10 on Sep 18. This Zacks Rank #5 (Strong Sell) stock has been losing sheen following its lower-than-expected second-quarter 2018 results, which also compelled management to trim earnings view. Quite apparent, the company has been grappling with increased raw material prices, lower sales volumes and adverse foreign currency translation. Also, U.S. tariffs on steel and aluminum have resulted in higher costs for the company’s raw materials.
These headwinds were more than enough to mar investors’ sentiments. In the past three months, shares of this Benton Harbor, MI-based company have lost 16.3% compared with its industry’s 17.6% decline. However, the S&P 500 index grew 4.6% in the same time frame.
That said, let’s take a closer look at the factors impacting the company’s performance.
Rising Input Cost a Major Barrier
Whirlpool’s operating results continued to be hurt by significant raw material cost inflation. Management believes that volatility in commodity prices adversely impacts the company’s operating performance. Additionally, imposition of tariffs on steel and aluminum due to trade war is hurting Whirlpool. In the last reported quarter, the company’s revenues from Latin America & EMEA decreased 13.6% and 8.3% year over year to $852 million and $1.1 billion, respectively. Also, the company witnessed significantly higher raw material costs in three of its four regional markets, including North America, Asia and EMEA.
Though operating margin expanded year over year, it was somewhat marred by raw material inflation, unit-volume declines and unfavorable currency. While management expects to gain from a favorable product price/mix through the rest of the year, it might be partly offset by lower global-revenue growth and increased raw material inflation.
Dismal Q2 Results Triggered Downtrend in Estimates
Whirlpool’s sales and earnings not only missed the Zacks Consensus Estimate but also declined on year-over-year basis. Dismal quarterly results and expectations of increased raw material costs in the future led management to cut its GAAP and adjusted earnings per share guidance for 2018. It now envisions adjusted earnings per share to be in the range of $14.20-$14.80 compared with the prior guidance of $14.50-$15.50. Management now anticipates GAAP earnings per share of $14.20-$14.80 compared with $12.30-$13.30 expected earlier.
The Zacks Consensus Estimate has been witnessing a downtrend, following dismal second-quarter results and trimmed outlook for 2018. Over the last 60 days, the company’s Zacks Consensus Estimate of $15.24 and $17.95 for 2018 and 2019 moved south by $1.04 and $1.25, respectively.
Wrapping Up
Although Whirlpool’s strong product pipeline, innovation and other efforts to improve margins remain on track, rising raw material costs have been spoil sport. Inflating cost of steel, which is a primary component for making washing machines, refrigerators and dryers among others, remains a potent concern. Moreover, higher freight cost may also act as a headwind.
Stay Away from Whirlpool for a While, 3 Stocks to Buy
Deckers Outdoor Corporation (DECK - Free Report) delivered an average positive earnings surprise of 71.9% in the trailing four quarters. It has long-term earnings per share growth rate of 12% and a Zacks Rank #2 (Buy).
Columbia Sportswear Company (COLM - Free Report) pulled off an average positive earnings surprise of 79.3% in the trailing four quarters. It has a long-term earnings growth rate of 10.8% and a Zacks Rank of 2.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Whirlpool Dips to a 52-Week Low, Input Costs a Major Concern
Shares of Whirlpool Corporation (WHR - Free Report) touched a 52-week low of $121.12, before closing the session a tad higher at $122.10 on Sep 18. This Zacks Rank #5 (Strong Sell) stock has been losing sheen following its lower-than-expected second-quarter 2018 results, which also compelled management to trim earnings view. Quite apparent, the company has been grappling with increased raw material prices, lower sales volumes and adverse foreign currency translation. Also, U.S. tariffs on steel and aluminum have resulted in higher costs for the company’s raw materials.
These headwinds were more than enough to mar investors’ sentiments. In the past three months, shares of this Benton Harbor, MI-based company have lost 16.3% compared with its industry’s 17.6% decline. However, the S&P 500 index grew 4.6% in the same time frame.
That said, let’s take a closer look at the factors impacting the company’s performance.
Rising Input Cost a Major Barrier
Whirlpool’s operating results continued to be hurt by significant raw material cost inflation. Management believes that volatility in commodity prices adversely impacts the company’s operating performance. Additionally, imposition of tariffs on steel and aluminum due to trade war is hurting Whirlpool. In the last reported quarter, the company’s revenues from Latin America & EMEA decreased 13.6% and 8.3% year over year to $852 million and $1.1 billion, respectively. Also, the company witnessed significantly higher raw material costs in three of its four regional markets, including North America, Asia and EMEA.
Though operating margin expanded year over year, it was somewhat marred by raw material inflation, unit-volume declines and unfavorable currency. While management expects to gain from a favorable product price/mix through the rest of the year, it might be partly offset by lower global-revenue growth and increased raw material inflation.
Dismal Q2 Results Triggered Downtrend in Estimates
Whirlpool’s sales and earnings not only missed the Zacks Consensus Estimate but also declined on year-over-year basis. Dismal quarterly results and expectations of increased raw material costs in the future led management to cut its GAAP and adjusted earnings per share guidance for 2018. It now envisions adjusted earnings per share to be in the range of $14.20-$14.80 compared with the prior guidance of $14.50-$15.50. Management now anticipates GAAP earnings per share of $14.20-$14.80 compared with $12.30-$13.30 expected earlier.
The Zacks Consensus Estimate has been witnessing a downtrend, following dismal second-quarter results and trimmed outlook for 2018. Over the last 60 days, the company’s Zacks Consensus Estimate of $15.24 and $17.95 for 2018 and 2019 moved south by $1.04 and $1.25, respectively.
Wrapping Up
Although Whirlpool’s strong product pipeline, innovation and other efforts to improve margins remain on track, rising raw material costs have been spoil sport. Inflating cost of steel, which is a primary component for making washing machines, refrigerators and dryers among others, remains a potent concern. Moreover, higher freight cost may also act as a headwind.
Stay Away from Whirlpool for a While, 3 Stocks to Buy
G-III Apparel Group, Ltd. (GIII - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Deckers Outdoor Corporation (DECK - Free Report) delivered an average positive earnings surprise of 71.9% in the trailing four quarters. It has long-term earnings per share growth rate of 12% and a Zacks Rank #2 (Buy).
Columbia Sportswear Company (COLM - Free Report) pulled off an average positive earnings surprise of 79.3% in the trailing four quarters. It has a long-term earnings growth rate of 10.8% and a Zacks Rank of 2.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>