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Whirlpool's Solid Growth Prospects Lead to 52-Week High

Zacks Equity Research

Shares of Whirlpool Corp. (WHR) have been on a roll as they climbed 4.1% since the company released its third-quarter 2014 earnings on Oct 28. Further, the stock hit a 52-week high of $177.18 yesterday, before eventually closing at $175 and amassing a year-to-date return of 13.8%.

During the third quarter, Whirlpool witnessed steady growth in its top and bottom lines, mainly on the back of ongoing investments in its brands, product innovation as well as cost-reduction initiatives.

The company’s adjusted earnings per share of $3.04 rose 11.8% from the prior-year quarter, although it missed the Zacks Consensus Estimate of $3.15.  Revenues for the quarter came in at $4,824 million, up 3% from the comparable year-ago quarter figure and also above the Zacks Consensus Estimate of $4,787 million.

Whirlpool’s understanding of the fact that innovation is a key ingredient for growth has enabled it to deliver innovative products, thus leading to incremental revenues and market share gains.

Further, the company is making serious efforts toward global expansion. In a recent step toward this direction, Whirlpool acquired a majority stake in Italy-based Indesit. The acquisition will help Whirlpool to strengthen its foothold in the European appliances market. This also highlights the company’s focus on diversifying its business across the world, thereby eliminating geographical risks arising from concentration in one region.

Taking a glance at the financial status of this largest home-appliances manufacturer in the world, which comes ahead of ElectroluxAB (ELUXY), LG, Samsung Electronics Co. Ltd. (SSNLF), General Electric Company (GE) and Haier Electronics Group Company Ltd., we note that Whirlpool is a promising option for investors seeking both growth and income.

The company is known for its shareholder-friendly moves, as since 1983, it has increased its dividend from 22.5 to 75 cents a share. In 2013, the company shelled out $187 million in cash dividends and $350 million toward share buyback. We believe that its continuous dividend payments and increments, along with regular share buybacks, reflect the growth potential of its earnings and cash flow generation capabilities.

Coming to numbers, Whirlpool’s last traded price is 4.5% below the Zacks Consensus average analyst price target of $183.29, leaving room for an upside potential. Additionally, its long-term growth rate is estimated at 23.5%, higher than the peer group average of 16.3%, underscoring the company’s growth prospects.

All the aforementioned factors speak positively about this Zacks Rank #3 (Hold) stock, instilling confidence among investors.

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