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Why Is Whirlpool (WHR) Down 8% Since its Last Earnings Report?
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A month has gone by since the last earnings report for Whirlpool Corporation (WHR - Free Report) . Shares have lost about 8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is WHR due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Whirlpool Beats on Q4 Earnings, Sales Lag
Whirlpool reported mixed fourth-quarter 2017 results with earnings topping estimates while sales missing the same. While the company posted a positive earnings surprise after five consecutive misses, sales lagged for the third straight quarter. Further, management provided an earnings outlook for 2018. Moreover, the company hinted at margin gains in the year.
Q4 Highlights
Whirlpool’s quarterly adjusted earnings per share came in at $4.10, ahead of the Zacks Consensus Estimate of $4.01. However, it declined 5.3% from $4.33 per share earned in the year-ago quarter.
On a GAAP basis, the company reported net loss of $3.69 per share, against earnings per share of $2.36 in the prior-year quarter. The loss reported can primarily be attributed to a non-cash charge of $420 million associated with the new tax reform.
Revenues of $5,702 million rose nearly 1% from the comparable year-ago quarter revenues of $5,656 million. However, the top line fell short of the Zacks Consensus Estimate of $5,836 million. On a currency-neutral basis, sales declined of 1.6%. Top-line growth was driven by gains in Latin America and EMEA regions.
Further, adjusted operating profit in the quarter dropped 9% to $392 million from $431 million in the year-ago quarter. Also, the operating margin contracted 70 basis points (bps) to 6.9%. During the quarter, unit volume declines and raw material inflation completely negated the gains from favorable cost productivity, product price/mix and restructuring benefits.
Regional Performance
Revenues from North America remained flat with last year at $3.1 billion, while it dipped 0.8% on a currency-neutral basis. Adjusted operating profit margin expanded 60 bps to 11.8%. In dollar terms, operating profit grew 5.4% to $368 million. Notably, operating profit gains reflected from a favorable product price/mix, which mitigated the negative impact of raw material inflation.
Revenues from Latin America rose 5.2% year over year to $905 million. Excluding currency translations, it increased 4.4%. Adjusted operating margin of 7.1% contracted 120 bps, mainly due to raw material inflation, which was partly neutralized by cost productivity and the sale and monetization of some tax credits.
Meanwhile, revenues from EMEA increased 1.5% to $1.4 billion. On a currency-neutral basis, it dropped 5.6%. Whirlpool reported adjusted operating profit of $4 million in the fourth quarter, versus adjusted operating profit of $45 million in the year-ago quarter. Further, adjusted operating margin came in at 0.3%, which fell 300 bps from the year-ago period. The decline can be attributed to raw material inflation and adverse product price/mix, negated by favorable cost productivity and restructuring gains.
Revenues from Asia declined 5.4% to $333 million from $352 million in the prior-year quarter. Excluding currency effects, revenues decreased 8.3%. Moreover, the segment reported adjusted operating loss of $1 million against operating profit of $19 million in the prior-year quarter. Unit volume declines and raw material inflation were the main culprits for the decline, partly offset by favorable product price/mix.
Financial Position
Whirlpool had cash and cash equivalents of $1,196 million as of Dec 31, 2017, and long-term debt of $4,392 million.
The company generated cash from operating activities of $1,264 million in 2017. Capital expenditures for the year totaled $684 million. As of Dec 31, 2017, Whirlpool generated free cash flow of $707 million.
Notably, the company returned $1.1 billion to shareholders in 2017. Further, it expects to continue buying back shares in 2018.
Guidance
Following a mixed fourth quarter, Whirlpool provided earnings projections for 2018. Moreover, the company hinted at margin gains in the year. The company envisions adjusted earnings per share for 2018 in a range of $14.50-$15.50. On a GAAP basis, it anticipates earnings in a range of $12.45-$13.45 per share.
Further, the company remains optimistic about cost reduction initiatives and global price/mix, which is likely to result in considerable margin improvements in 2018. This builds the company’s hopes of achieving cash conversion goal as well as returning more cash to shareholders.
The company anticipates generating free cash flow of $1-$1.1 billion in 2018, while operating cash flows are projected in the range of $1.7-$1.8 billion. This guidance includes restructured cash outlays of approximately $300 million, pension contributions of $35 million and capital expenditures of $675 million related to free cash flows.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate shifted lower by 7.5% due to these changes.
At this time, WHR has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
WHR has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is Whirlpool (WHR) Down 8% Since its Last Earnings Report?
A month has gone by since the last earnings report for Whirlpool Corporation (WHR - Free Report) . Shares have lost about 8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to its next earnings release, or is WHR due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Whirlpool Beats on Q4 Earnings, Sales Lag
Whirlpool reported mixed fourth-quarter 2017 results with earnings topping estimates while sales missing the same. While the company posted a positive earnings surprise after five consecutive misses, sales lagged for the third straight quarter. Further, management provided an earnings outlook for 2018. Moreover, the company hinted at margin gains in the year.
Q4 Highlights
Whirlpool’s quarterly adjusted earnings per share came in at $4.10, ahead of the Zacks Consensus Estimate of $4.01. However, it declined 5.3% from $4.33 per share earned in the year-ago quarter.
On a GAAP basis, the company reported net loss of $3.69 per share, against earnings per share of $2.36 in the prior-year quarter. The loss reported can primarily be attributed to a non-cash charge of $420 million associated with the new tax reform.
Revenues of $5,702 million rose nearly 1% from the comparable year-ago quarter revenues of $5,656 million. However, the top line fell short of the Zacks Consensus Estimate of $5,836 million. On a currency-neutral basis, sales declined of 1.6%. Top-line growth was driven by gains in Latin America and EMEA regions.
Further, adjusted operating profit in the quarter dropped 9% to $392 million from $431 million in the year-ago quarter. Also, the operating margin contracted 70 basis points (bps) to 6.9%. During the quarter, unit volume declines and raw material inflation completely negated the gains from favorable cost productivity, product price/mix and restructuring benefits.
Regional Performance
Revenues from North America remained flat with last year at $3.1 billion, while it dipped 0.8% on a currency-neutral basis. Adjusted operating profit margin expanded 60 bps to 11.8%. In dollar terms, operating profit grew 5.4% to $368 million. Notably, operating profit gains reflected from a favorable product price/mix, which mitigated the negative impact of raw material inflation.
Revenues from Latin America rose 5.2% year over year to $905 million. Excluding currency translations, it increased 4.4%. Adjusted operating margin of 7.1% contracted 120 bps, mainly due to raw material inflation, which was partly neutralized by cost productivity and the sale and monetization of some tax credits.
Meanwhile, revenues from EMEA increased 1.5% to $1.4 billion. On a currency-neutral basis, it dropped 5.6%. Whirlpool reported adjusted operating profit of $4 million in the fourth quarter, versus adjusted operating profit of $45 million in the year-ago quarter. Further, adjusted operating margin came in at 0.3%, which fell 300 bps from the year-ago period. The decline can be attributed to raw material inflation and adverse product price/mix, negated by favorable cost productivity and restructuring gains.
Revenues from Asia declined 5.4% to $333 million from $352 million in the prior-year quarter. Excluding currency effects, revenues decreased 8.3%. Moreover, the segment reported adjusted operating loss of $1 million against operating profit of $19 million in the prior-year quarter. Unit volume declines and raw material inflation were the main culprits for the decline, partly offset by favorable product price/mix.
Financial Position
Whirlpool had cash and cash equivalents of $1,196 million as of Dec 31, 2017, and long-term debt of $4,392 million.
The company generated cash from operating activities of $1,264 million in 2017. Capital expenditures for the year totaled $684 million. As of Dec 31, 2017, Whirlpool generated free cash flow of $707 million.
Notably, the company returned $1.1 billion to shareholders in 2017. Further, it expects to continue buying back shares in 2018.
Guidance
Following a mixed fourth quarter, Whirlpool provided earnings projections for 2018. Moreover, the company hinted at margin gains in the year. The company envisions adjusted earnings per share for 2018 in a range of $14.50-$15.50. On a GAAP basis, it anticipates earnings in a range of $12.45-$13.45 per share.
Further, the company remains optimistic about cost reduction initiatives and global price/mix, which is likely to result in considerable margin improvements in 2018. This builds the company’s hopes of achieving cash conversion goal as well as returning more cash to shareholders.
The company anticipates generating free cash flow of $1-$1.1 billion in 2018, while operating cash flows are projected in the range of $1.7-$1.8 billion. This guidance includes restructured cash outlays of approximately $300 million, pension contributions of $35 million and capital expenditures of $675 million related to free cash flows.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month. There has been one revision higher for the current quarter compared to one lower. In the past month, the consensus estimate shifted lower by 7.5% due to these changes.
Whirlpool Corporation Price and Consensus
Whirlpool Corporation Price and Consensus | Whirlpool Corporation Quote
VGM Scores
At this time, WHR has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Outlook
WHR has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.