Why Is Whirlpool (WHR) Down 0.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Whirlpool (WHR). Shares have lost about 0.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Whirlpool due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Whirlpool Q4 Earnings Surpass Estimates, Sales Miss
Whirlpool posted mixed fourth-quarter 2021 results, wherein earnings beat the Zacks Consensus Estimate, while the top line missed the same. Sales increased marginally, while earnings took a dive. The quarterly results gained from strong demand and efficient cost-based pricing efforts. However, supply-chain constraints and raw material inflation affected the performance across most regions.
Management is on track with efforts to navigate the industry challenges and deliver strong performance in the forthcoming periods. The company issued the 2022 view.
The appliance maker delivered adjusted earnings of $6.14 per share, down 7.9% from $6.67 a share earned in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of $5.88. This marks the company’s 14th straight earnings beat. The bottom line was supported by cost-based pricing actions, which helped offset more than $500 million of inflation, led by raw material cost increases.
Net sales of $5,815 million inched up 0.3% from the year-ago quarter’s levels. Sustained consumer demand and cost-based pricing efforts drove the top line. However, the top line missed the Zacks Consensus Estimate of $5,871 million. Excluding the impacts of foreign exchange, net sales amounted to $5,850 million, up 0.9% year over year. However, net sales improved 8% from the 2019 levels.
The gross profit for fourth-quarter 2021 was $1,063 million, down 22.2% from $1,366 million reported in the year-ago quarter.
Adjusted EBIT of $502 million declined 23.8% from $659 million in the year-ago quarter. Adjusted EBIT margin of 8.6% fell 280 basis points (bps) year over year. The metric was adversely impacted by raw material inflation.
Regional Performance
Net sales for the North America segment increased 2.6% year over year to $3,291 million, driven by the strong execution of cost-based pricing actions, partly offset by elevated supply constraints. Excluding the currency impact, sales in the region rose 2.3%. The segment’s EBIT declined 13.6% year over year to $504 million, while the EBIT margin contracted 290 bps to 15.3%, driven by supply constraints and inflation, partly offset by gains from price/mix.
Net sales for the EMEA segment inched down 0.3% year over year to $1,412 million. Excluding currency impacts, sales in the region improved 1.9%. Revenues were affected by supply-chain constraints, partly mitigated by cost-based pricing actions. The segment’s EBIT of $20 million plunged 50% from the year-ago period’s levels. The EBIT margin of 1.4% dropped 140 bps due to inflation, partially offset by cost-based pricing actions.
Net sales from Latin America increased 1.2% year over year to $831 million, driven by cost-based pricing increases. Excluding the currency impacts, sales in the region advanced 2.4%. The segment’s EBIT of $56 million declined 44% from the year-ago period’s levels. The EBIT margin contracted 540 basis points to 6.7%, mainly affected by inflation and supply-chain headwinds, somewhat offset by cost-based price increases.
Net sales in Asia declined 20.6% year over year to $281 million, owing to the partial divestiture of Whirlpool China. Excluding the currency impacts, sales for the region were down 19.6%. The segment’s EBIT of $17 million reflected a 20% decline from $21 million reported in the year-ago quarter. The segment’s EBIT margin of 5.9% was unchanged from the prior-year quarter as cost-based price increases partly offset inflation.
Other Financial Details
As of Dec 31, 2021, Whirlpool had cash and cash equivalents of $3,044 million, long-term debt of $4,929 million, and stockholders’ equity of $4,846 million, excluding non-controlling interests of $167 million.
In 2021, Whirlpool generated cash of $2,176 million from operating activities, while delivering an adjusted free cash flow of $1,963 million. Free cash flow benefited from earnings growth and working capital improvements. The company incurred a capital expenditure of $213 million in 2021.
In 2021, the company returned $1.4 billion to shareholders, including share repurchases of $1 billion. In the fourth quarter, it repurchased shares worth $400 million.
2022 View
For 2022, Whirlpool envisions net sales growth of 5-6%. On a GAAP and ongoing basis, the company expects earnings per share of $27.00-$29.00. It anticipates a tax rate of 24-26% for 2022 on both GAAP and adjusted basis.
The company expects cash provided by operating activities of $2.2 billion and an adjusted free cash flow of $1.5 billion for 2022.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -28.62% due to these changes.
VGM Scores
At this time, Whirlpool has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Whirlpool has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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