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Whirlpool Attains New 52-Week High

Zacks Equity Research

Shares of Whirlpool Corporation (WHR) hit a new 52-Week high of $117.63 on Monday, Mar 4, as the company continues to post robust quarterly results and provided impressive fiscal 2013 outlook. This Zacks Rank #1 (Strong Buy) home appliances company eventually closed at $117.36, representing a healthy return of approximately 15.9% from the closing price of $101.29 on Dec 31, 2012. Average volume of shares traded over the last 3 months stands at approximately 1,182,510.

Drivers that Triggered Momentum

An impressive record of beating the quarterly earnings expectations, a positive fiscal 2013 outlook and a decent dividend yield enabled the shares of Whirlpool to reach a new high.

With respect to earnings surprise, Whirlpool has beaten the Zacks Consensus Estimate thrice in the trailing 4 quarters, topping it by 3.2% in the fourth quarter of 2012. The average positive surprise in the trailing 4 quarters comes to 9.0%.

On Jan 31, 2013, Whirlpool reported outstanding bottom-line results for the fourth quarter of 2012. Adjusted quarterly earnings of $2.29 per share were significantly higher than the year-ago quarter’s earnings of 32 cents and surpassed the Zacks Consensus Estimate of $2.22. The robust bottom-line performance was primarily driven by the company’s sustained focus on cost and capacity reduction initiatives, along with better price and product mix.

Buoyed by better-than-expected bottom-line results, Whirlpool now expects to deliver adjusted earnings in the range of $9.25–$9.75 per share in 2013, up 31%–38% from 2012. Currently, the Zacks Consensus Estimate for 2013 stands at $9.54 per share, which climbed nearly 5% in the last 30 days.

Apart from strong fourth-quarter results, Whirlpool’s growth story looks compelling. We believe that the company’s sustained focus on developing new products along with cost-reduction initiatives and diversification of business across the world, to eliminate the geographical risk arising from concentration in one region, bodes well for future growth.

Over the last 101 years, Whirlpool has emerged as the leading manufacturer and supplier of major home appliances. It is considered to be the largest home-appliances manufacturer in the world, ahead of Electrolux AB (ELUXY), LG, Samsung, General Electric Co. (GE) and Haier Electronics Group Company, Ltd. (HRELF). Moreover, the company is placed among the leading home appliances makers in India and Europe.

Whirlpool is also known for its shareholder-friendly moves. Since 1983, the company has increased its dividend from 22.5 cents to 50 cents. This currently yields a solid 1.7%, with a payout ratio of 40%. We believe that its continuous dividend payments and increments reflect the growth potential of its earnings and cash flow generation capabilities.

Stock’s Key Indicators

Whirlpool currently trades at a forward P/E of 12.31x, significantly lower than the Zacks industry average of 15.03x. Again its price-to-book (P/B) and price-to-sales (P/S) ratios of 2.09 and 0.51, respectively, are lower than the Zacks industry average. Moreover, the company’s return-on-investment (ROI) and return-on-equity (:ROE) of 8.9% and 12.7%, respectively, are significantly higher than the Zacks industry average. Given the company’s compelling fundamentals and earnings surprise history, we believe that its EPS will continue to grow further.

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