Whirlpool (WHR) Beats on Q2 Earnings, Updates 2020 View
Shares of Whirlpool Corporation WHR rose more than 4% during the after-market trading session on Jul 22, following better-than-expected second-quarter 2020 results. The quarter marked a positive earnings surprise for the company for the eighth straight quarter. However, both top and bottom lines fell year over year. Although strict cost-containment actions provided some cushion to the stock.
That said, management highlighted that the company witnessed solid recovery in demand across all regions in June. Impressively, this contributed to year-over-year global margin expansion for the month. Notably, the company also revised its full year outlook.
An Insight Into Q2
The company delivered adjusted earnings of $2.15 per share that surpassed the Zacks Consensus Estimate of 74 cents but declined 46.4% from the year-ago quarter’s $4.01. On a GAAP basis, it reported earnings of 55 cents per share, significantly down from $1.04 registered in the prior-year period.
Net sales of $4,042 million declined 22.1% from the year-ago period but exceeded the Zacks Consensus Estimate of $3,571 million. Organic net sales fell 13.8% to $4,191 million.
Adjusted operating profit (EBIT) decreased 42.1% to $210 million from $363 million in the year-ago quarter. We note that adjusted operating margin contracted 180 basis points to 5.2%. This can be attributed to COVID-19-related disruptions of about 300 basis points, which more than offset the company’s stringent cost discipline.
Whirlpool Corporation Price, Consensus and EPS Surprise
Whirlpool Corporation price-consensus-eps-surprise-chart | Whirlpool Corporation Quote
Regional Performance
Net sales from North America dropped 12.5% year over year to $2,501 million. On a currency-neutral basis, sales for the region declined 12.3%. The segment’s operating profit fell 10.6% to $316 million, while operating margin expanded 20 basis points to 12.6%. The uptick can be attributable to aggressive cost actions and deferred marketing spend, which more than offset the muted demand.
Net sales from EMEA (Europe, Middle East and Africa) declined 19% to $836 million. On a currency-neutral basis, sales for the region fell 17%. Notably, the segment’s operating loss for the quarter under review came in at $66 million wider than the loss of $16 million in the year-ago period, due to adverse impacts of reduced volumes. However, improved demand in June is helping the segment get back on track.
Net sales from Latin America plunged 51.1% to $434 million. On a currency-neutral basis, sales for the region declined 39%. However, the segment’s organic net sales fell 4.1% due to soft demand in Mexico, which somewhat offset gain in share. The segment reported an operating profit of $11 million, down from $56 million in the year-ago period. Moreover, operating margin contracted 380 bps to 2.5%. Management stated that unfavorable currency and reduced volumes offset cost-containment efforts. The region's operating profit includes $23 million related to the Embraco compressor business.
Net sales from Asia decreased 37.1% to $271 million from the prior-year quarter’s figure due to shut down in India in April/May with recovery taking place in the month of June.. On a currency-neutral basis, sales for the region fell 33.7%. The segment reported an operating loss of $18 million against an operating profit of $15 million in the prior-year period. The downside mainly resulted from sluggish demand in the region, which more than offset cost-cutting efforts.
Financial Position
As of Jun 30, 2020, Whirlpool had cash and cash equivalents of $2,546 million, long-term debt of $4,886 million and shareholders’ equity of $3,018 million, excluding non-controlling interest of $907 million. Management highlighted that the company has roughly $2 billion available in remaining committed credit facilities. The company generated negative free cash flow of $873 million during six-month period ended on Jun 30.
Guidance
The company has updated its 2020 guidance. It envisions 2020 sales to fall roughly 10-15% as compared to the earlier guided view of a sales decline of 13-18%. Meanwhile, organic sales are likely to drop 7-12% as compared to the prior view of a decline of 10-15%.
Also, management highlighted that it is on track to generate cost savings of $500 million in 2020, driven by strategies undertaken in the wake of the ongoing COVID-19 crisis.
Price Performance
We note that this Zacks Rank #3 (Hold) stock has surged 40.4% in the past three months, outperforming the industry’s growth of 35.4%.
3 Better-Ranked Stocks
Hannesbrands HBI has an impressive long-term earnings growth rate of 3.3% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Electrolux ELUXY has an impressive long-term earnings growth rate of 8.2% and a Zacks Rank #2 (Buy).
Crocs CROX has an impressive long-term earnings growth rate of 15% and a Zacks Rank #2.
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