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Whirlpool (WHR) Gains on Rising Demand in Home Appliance Market

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Zacks Equity Research
·4 min read
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With stay-at-home directives widely adopted amid the coronavirus pandemic, consumers are investing more in home upgrades. The trend has been favoring home appliance market players such as Whirlpool Corporation WHR. Markedly, the company’s third-quarter 2020 results indicate favorable demand for home appliances across several markets. Apart from this, the company is focused on boosting margins through effective cost-curtailment efforts. Let’s take a closer look at these winning aspects of this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.

Favorable Demand Trends Are An Upside

During the third quarter, strong demand conditions favored Whirlpool's performance across the Latin American and EMEA (Europe, Middle East and Africa) regions. The Latin America region benefitted from growth witnessed in Brazil and Mexico. In the EMEA region, management highlighted that strong demand conditions aided solid volume growth. In fact, some of the key countries in this region witnessed double digit sales growth.

Although the company’s North America segment was under pressure due to supply constraints during the third quarter, a high order backlog indicates that demand trends continue to remain favorable in the region. Rising customer orders are likely to keep supporting the region’s performance in the forthcoming periods.

Measures to Boost Cost Efficiency

Whirlpool has been on track with its cost-curtailment plans to boost margins and enhance liquidity position to navigate through the pandemic induced challenges. Markedly, exceptional execution of go-to-market and cost takeout endeavors drove the bottom line during the third quarter. In fact, measures adopted by the company to reduce costs and boost efficiency led to savings worth nearly $175 million in the said quarter. The company’s efforts, in this respect, includes actions such as curtailing structural and discretionary costs, capturing raw material deflation opportunity, effectively managing working capital as well as syncing supply chain and labor levels with demand. Going ahead, the company’s COVID-19 response plan is on track to deliver more than $500 million in cost takeout in 2020.

Wrapping Up

Strong market presence and superior brand image positions Whirlpool well to capture increasing customer demand for home and kitchen products. In its last earnings call, management highlighted that demand trends for home appliances are likely to remain favorable in the forthcoming periods as well. To effectively meet such demand conditions, the company is on track with boosting e-commerce and direct-to-consumer capabilities. Such efforts coupled with the company’s plans to boost savings are likely to keep yielding and support the company’s performance in the forthcoming periods.

Shares of the company have gained 13.9% in the past three months, almost in line with the industry’s growth in the said time frame.

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Builders FirstSource, Inc. BLDR, which flaunts a Zacks Rank #1, surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters.

Lowes Companies, Inc. LOW has a long-term earnings growth rate of 10% and a Zacks Rank #2 (Buy).

Tecnoglass Inc. TGLS has an impressive long-term earnings growth rate of 20% and a Zacks Rank #2.

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Whirlpool Corporation (WHR) : Free Stock Analysis Report
 
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