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Why Whirlpool Stock Gained 24% in January

Demitrios Kalogeropoulos, The Motley Fool

What happened

Shares of appliance specialist Whirlpool (NYSE: WHR) outpaced the market by a wide margin last month, gaining 24% compared to a 8% spike in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally only removed a portion of shareholders' recent losses, and the stock is still down over 20% in the past 52 weeks, verses a 2% drop in the wider market.

A woman operating a washing machine.

Image source: Getty Images.

So what

The stock benefited from improving investor expectations around the prospects of a global recession last month. These fears helped drive Whirlpool shares lower in December, so the company was in an ideal position to post market-beating gains if the worries subsided, as they did last month.

Executives added to the optimism by revealing plenty of good news in their fourth-quarter report. That announcement showed flat global sales but rising profitability as the company passed along price increases. That allowed Whirlpool to generate healthy growth in earnings and cash flow despite what management called the "macroeconomic volatility" that hurt demand and boosted costs in many of its markets.

Now what

CEO Marc Bitzer and his team issued a conservative outlook for 2019 that leaves the door open for a second straight year of modestly declining sales. Uncertainty on world trade and economic growth might keep the overall industry roughly flat, they said. But Whirlpool's cost cuts, and its ability to pass along price increases, should help keep profitability marching higher so that it can deliver bigger profits despite those sluggish selling conditions.

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Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.