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Whirlpool (WHR) Withdraws 2020 Guidance on COVID-19 Impact

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Whirlpool Corporation WHR withdrew its 2020 financial guidance, citing the uncertainty regarding the coronavirus pandemic, which is impacting global business and consumer activities. During its fourth-quarter earnings call, management expected adjusted earnings per share of $16-$17 for 2020. 

Further, management borrowed $2.2 billion on Mar 13 from its current revolving credit facility, which will be partly utilized to fund commercial paper repayment. The remaining amount will be kept as cash balance or for funding additional commercial paper repayment, working capital and other general corporate purposes. 

Other major retailers, including Aaron’s AAN, Ross Stores ROST and V.F. Corp VFC, have also adopted similar moves, given the impact of COVID-19 on their businesses. Notably, Aaron’s withdrew its 2020 guidance in response to the ongoing COVID-19 outbreak and its unpredictable impacts. Further, management has drawn $300 million from its revolving credit facility to add to its cash balance. Ross Stores withdrew its top and bottom-line guidance for fiscal 2020 and the first quarter. Also, management has drawn $800 million from its revolving credit facility to add to its cash balance. V.F. Corporation also withdrew the guidance for fiscal 2020, given the growing uncertainty about the pandemic and its duration. Also, management strengthened its cash position by drawing $1 billion from its revolving credit facility.

Coming back to the news, the ongoing pandemic has led Whirlpool to witness challenging conditions and significant disruptions in its operations as the government ordered shutdown of various facilities. To this end, it lowered production capacity at manufacturing facilities across the United States, per the guidelines of the Centers for Disease Control. We also note that its facility at Amana has been shuttered following an employee tested positive for COVID-19.

Similarly, production has been reduced at the Joinville, Brazil, manufacturing facility, in sync with the guidelines. Further, Whirlpool has temporarily closed all operations at manufacturing facilities in Italy, which has led to logistic disruptions in the region. In the Asia Pacific, operations at all manufacturing facilities, particularly in India, remain suspended, while production in China has resumed.

Alongside disruptions in production, sluggish demand is anticipated to affect results. The company now foresees earnings before interest and taxes during first-quarter 2020 to be marginally higher than its earlier guided view of $25-$40 million.

Driven by such downsides, shares of this Zacks Rank #3 (Hold) company have slumped 42.7% compared with the industry’s decline of 55.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

However, management is doing its part to curb the spread of this deadly virus. In this regard, the company earlier undertook precautionary measures such as travel restrictions, work from home facilities, implementing physical distancing in factories and improving cleaning and hygiene in a bid to safeguard employees and customers. Besides, it has decided to continue operating so that essential services can be delivered to customers in such testing times. In doing so, the company has cut down on discretionary budget, reduced its variable costs to a large extent and tightened working capital.

All said, we expect Whirlpool’s cost-cutting initiative, which was launched before the outbreak; a solid balance sheet; transformational efforts; and strength in cash flow to help it stay afloat.

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