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Whirlpool's (WHR) Q4 Earnings & Sales Beat Estimates on High Demand

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Zacks Equity Research
·5 min read
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Shares of Whirlpool Corporation WHR fell more than 4% during the after-market trading session on Jan 27 despite the company’s impressive fourth-quarter 2020 results. Notably, both top and bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. This marked the company’s third successive quarter of record adjusted earnings. Markedly, the company witnessed significant year-over-year margin expansion in North America, Latin America, and Europe, Middle East and Africa (EMEA) regions. Clearly, demand for home appliances drove the quarterly results.

Moreover, management envisions signs of recovery such as improved demand and encouraging housing trends that position it well for 2021. As a result, Whirlpool envisions net sales (excluding currency impact) growth of approximately 6% for 2021. Additionally, it anticipates adjusted earnings in a band of $19-$20 per share, whose mid-point of $19.5 suggest an increase from the current Zacks Consensus Estimate which is pegged at $19.3.

Impressively, this Zacks Rank #3 (Hold) stock has gained 12.8% in the past three months, outperforming the industry’s growth of 9.1%.

An Insight into Q4

The appliances maker delivered adjusted earnings of $6.64 per share that increased 35.2% year over year on the back of exceptional execution of go-to-market and cost takeout endeavors. Notably, the bottom line also surpassed the Zacks Consensus Estimate of $6.39 per share.

Net sales of $5,798 million rose 7.7% from the year-ago period and outpaced the Zacks Consensus Estimate of $5,576 million, marking the third successive beat. Organic net sales increased 10.3% to $5,937 million. The company delivered sales growth in all regions, except Asia.

Adjusted operating profit (EBIT) came in at $657 million, up from $389 million in the year-ago quarter. We note that the adjusted operating margin expanded 410 basis points to 11.3% with all regions registering meaningful margin expansion.

Regional Performance

Net sales from North America increased 4.4% year over year to $3,208 million, driven by encouraging consumer trends. Excluding the currency impact, sales for the region rose 4.3%. Markedly, the segment’s EBIT surged 41.7% to $581 million, while the EBIT margin expanded 480 basis points to 18.1%. Aggressive cost-containment efforts and go-to-market actions fueled margin expansion.

Net sales from EMEA increased 21% to $1,416 million. Excluding the currency impact, sales for the region rose 17.8%. Management highlighted that demand recovery drove solid volume growth of 6.5% year over year, with double-digit growth in key countries. Notably, the segment’s EBIT of $40 million improved significantly from $11 million in the year-ago period, as higher demand and cost discipline offset currency headwinds.

Net sales from Latin America grew 5% to $821 million. Excluding the currency impact, sales for the region advanced 27.9% owing to industry growth in Brazil. The segment EBIT of $100 million surged from $42 million in the year-ago period. Impressively, the EBIT margin expanded 680 basis points to 12.1%, courtesy of increased demand and positive price/mix that helped mitigate currency headwinds.

Net sales from Asia decreased 0.7% to $354 million from the prior-year quarter’s reported figure. Excluding the currency impact, sales for the region fell 0.7%. The company experienced demand recovery and share gains in India, despite pandemic-induced disruptions. The segment EBIT came in at $21 million, reflecting a sharp rise from $2 million reported in the year-ago period. The segment EBIT margin expanded on the back of significant share gains and stringent cost efforts.

Whirlpool Corporation Price, Consensus and EPS Surprise

Whirlpool Corporation Price, Consensus and EPS Surprise
Whirlpool Corporation Price, Consensus and EPS Surprise

Whirlpool Corporation price-consensus-eps-surprise-chart | Whirlpool Corporation Quote

Financial Position

As of Dec 31, 2020, Whirlpool had cash and cash equivalents of $2,924 million, long-term debt of $5,059 million and stockholders’ equity of $3,799 million, excluding non-controlling interest of $910 million. The company repaid $1.7 billion of outstanding short-term debt by year-end, including all COVID-related short-term borrowings. Management also highlighted that it has a liquidity of $2.9 billion.

During the twelve-month period ended on Dec 31, 2020, Whirlpool has generated a free cash flow of $1,246 million. The company expects a free cash flow of more than $1 billion for 2021. Management anticipates incurring capital expenditures of $410 million in the current financial year.

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Skechers SKX, again a Zacks Rank #2 stock, delivered an earnings surprise of 22.1%, on average, in the trailing four quarters.

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