Whirlpool (WHR) Q4 Earnings Beat, Sales Lag Estimates
Whirlpool Corporation WHR posted fourth-quarter 2022 results, wherein earnings beat the Zacks Consensus Estimate, while sales lagged the same. Both metrics declined year over year. Results were hurt by the ongoing challenging environment and sluggish demand from rising inflation. The headwinds are likely to recover in the second half of fiscal 2023. Consequently, management issued the 2023 view.
Shares of the company have gained 11.8% in the past three months compared with the industry’s 13.5% growth. We also note that shares of WHR jumped more than 2% after the trading session on Jan 30. This might be owing to the earnings beat in the quarter under review.
Notably, management concluded the strategic review of EMEA. As part of this, the company’s European major domestic appliance business will form a new entity with Arçelik. The deal is expected to close in the second half of 2023. The company announced the successful buyout of InSinkErator, which has had no material impact on Q4 results.
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Insight Into Q4
The appliance maker delivered adjusted earnings of $3.89 per share, declining 37% from $6.14 in the year-ago quarter. However, the bottom line surpassed the Zacks Consensus Estimate of $3.23 and our estimate of $3.23.
Net sales of $4,923 million dropped 15.3% from the year-ago quarter. The top line lagged the Zacks Consensus Estimate of $5,047 million and our estimate of $5,254.2 million. Excluding the unfavorable impacts of foreign exchange, net sales amounted to $5,059 million, down 13% year over year. The downside is mainly due to a one-off supply disruption in North America and drab demand, which somewhat offset favorable price/mix.
The gross profit for fourth-quarter 2022 was $645 million, down 39.3% from $1,063 million reported in the year-ago quarter.
Ongoing EBIT of $171 million declined 66% from $502 million in the year-ago quarter. The ongoing EBIT margin of 3.5% contracted 510 bps year over year.
Net sales for the North America segment decreased 13.6% year over year to $2,874 million. Excluding the currency impact, sales in the region dropped 13%. The segment’s EBIT plunged 67.1% year over year to $166 million, while the EBIT margin contracted 950 bps to 5.8% due to elevated cost inflation and one-off supply-chain disruption.
Net sales for the EMEA segment were down 27.2% year over year to $1,028 million. Excluding currency impacts, sales in the region dipped 18.1%. The metric was hurt by drab demand in key countries. The segment’s EBIT was at a loss of $4 million compared with the year-ago quarter’s earnings of $20 million due to lower volume, cost inflation and unfavorable currency, which offset cost-based pricing actions.
Net sales from Latin America remained flat year over year to $831 million, owing to a sequential demand rise in Mexico and Brazil, which offset cost-based pricing efforts. Excluding the currency impacts, sales in the region fell 3.1%. The segment’s EBIT of $49 million declined 12.5% from the year-ago period’s $56 million. The EBIT margin contracted 80 bps to 5.9%, mainly affected by inflation, somewhat offset by cost-saving efforts.
Net sales in Asia fell 22.1% year over year to $219 million mainly due to muted consumer demand, which was partly offset by cost-based pricing. Excluding the currency impacts, sales for the region were down 15.9%. The segment’s EBIT of $6 million reflected a 65% plunge from the $17 million reported in the year-ago quarter. The segment’s EBIT margin of 2.7% contracted 320 bps from the prior-year quarter, driven by cost inflation and a top-line decline.
Other Financial Details
As of Dec 31, 2022, this Zacks Rank #4 (Sell) company had cash and cash equivalents of $1,958 million, long-term debt of $7,363 million and a stockholders’ equity of $2,336 million, excluding non-controlling interests of $170 million.
As of Dec 31, 2022, Whirlpool provided cash of $1,390 million from operating activities. It reported a free cash flow of $820 million. WHR incurred a capital expenditure of $570 million in the same period. Notably, capital expenditure is likely to be $600 million for 2022.
The company returned $1.3 billion in cash to shareholders with $900 million in share repurchases.
Whirlpool Corporation Price, Consensus and EPS Surprise
Whirlpool Corporation price-consensus-eps-surprise-chart | Whirlpool Corporation Quote
For 2023, Whirlpool envisions a net sales decline of 1-2% to $19.4 billion. On a GAAP and ongoing basis, Whirlpool expects earnings per share of $16-$18. Management anticipates a tax rate of 14-16% on a GAAP basis and adjusted basis. For 2023, Whirlpool expects cash used in operating activities of $1.4 billion and a free cash flow of $800 million.
That said, management is on track with its cost takeout actions and expects $800 to $900 million related to gains from the aforementioned measures and eased raw material inflation.
Stocks to Consider
Some better-ranked stocks from the Zacks Consumer Discretionary sector are PVH Corp PVH, Oxford Industries OXM and Ralph Lauren RL.
PVH Corp currently carries a Zacks Rank #2 (Buy). PVH has a trailing four-quarter earnings surprise of 22.9%, on average. PVH has a long-term earnings growth rate of 10.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for PVH Corp’s current financial-year sales and EPS indicates declines of 3.1% and 18.6%, respectively, from the year-ago period’s reported levels.
Oxford Industries currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial-year sales and earnings suggests growth of 23.1% and 34.2% from the year-ago period’s reported numbers, respectively.
Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 28.7%, on average.
The Zacks Consensus Estimate for Ralph Lauren’s next financial-year sales and EPS suggests growth of 5% and 13.4%, respectively, from the year-ago reported figures.
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