What Investors Should Know About Whirlpool's Earnings
- By Mayank Marwah
Whirlpool Corp. (NYSE:WHR) released its third-quarter results on Oct. 21 after the market closed. The company beat Zacks' consensus estimates for earnings and revenue.
The Benton Harbor, Michigan-based manufacturer of home appliances posted adjusted earnings of $6.91 per share, which was higher than earnings of $3.97 recorded in the year-ago period. Revenue rose from $5.09 billion in the prior-year quarter to $5.29 billion. Analysts had predicted earnings of $4.10 per share on $4.69 billion in revenue.
Segment performance
At Whirlpool North America, revenue declined 1.6% to $2.96 million, driven by Covid-related supply constraints. The operating profit came in at $567 million, up from $387 million reported in the year-ago quarter. Ebit margins surged 640 basis points to 19.2%, courtesy of cost reduction initiatives as well as reduced marketing investments, which helped in negating poor demand.
Sales in the Latin America division soared 13.7% on a year-over-year basis to $719 million. Industry growth and share gains in Brazil and Mexico fuelled revenue growth.The company registered an operating profit of $77 million, up from $29 million reported in the prior three-month period.
Sales in Europe, the Middle East and Africa spiked a combined 15.4% to $1.26 billion (13.6% barring currency translations). The company attributed the growth to a solid volume increase of 6.5% on a year-over-year basis, led by demand recovery in key countries. The company posted an operating profit of $43 million, which was higher than the operating loss of $4 million reported in last year.
At Whirlpool Asia, sales slumped 1.4% to $353 million. The operating profit came in at $6 million. The company did benefit from strong cost discipline during the quarter, but it was offset by negative demand in China.
Covid-19 response plan and financial position
The company's Covid-19 response plan, which hopes to generate cost savings of more than $500 million, has stayed on track. In the third quarter, the company trimmed costs to the extent of $175 million, which helped boost free cash flow. Year-to-date cost savings amounted to $350 million.
At quarter's end, the company's balance of total cash and cash equivalents stood at $3.53 billion. Long-term debt totalled $4.97 billion.
Although most companies are refraining from paying dividends, Whirlpool announced it would pay a dividend of $1.25 per share to its shareholders on Dec. 15, which is an increase of 5 cents per share from its previous dividend. This marks eight successive year of dividend increases.
Chief Financial Officer Jim Peters commented the following:
"Our liquidity position remains exceptionally strong, and we expect to continue to strengthen our balance sheet by paying down the short term debt we took on at the outset of the pandemic by the end of the year. Finally, we are happy to have announced a dividend increase for the eighth consecutive year, reflecting the confidence we have in our business now and in the future."
Guidance
For 2020, Whirlpool projects revenue to decline between 5% and 7%. This is lower than its prior forecast of 10% to 15%. Adjusted earnings per share for the same period is projected to range from $14.90 to $15.40. Free cash flow guidance is about $900 million, while cash flow from operating activities is anticipated to be roughly $1.2 billion. CEO Marc Bitzer said:
"Looking ahead, while uncertainty remains, our Q3 performance serves as an additional proof-point that we are well-positioned to capitalize on the structural improvements in housing and consumer trends, and firmly demonstrates the viability of our long-term shareholder value creation strategy."
Disclosure: I do not hold any positions in the stocks mentioned.
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This article first appeared on GuruFocus.
