Whirlpool Misses, Profits Dip - Analyst Blog

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Whirlpool Corporation ( WHR ) revealed a profit of $2.62 per share for the fourth quarter of 2011 compared with $171 million or $2.19 per share in the same period last year. However, excluding special items, profits decreased to 32 cents per share from 43 cents per share in the fourth quarter of 2010. It was significantly lower than the Zacks Consensus Estimate of $1.93 per share.

Revenues in the quarter fell marginally to $4.9 billion from $5.0 billion as improving price/mix was offset by unfavorable currency and lower industry demand. Revenues were slightly lower than the Zacks Consensus Estimate of $5.0 billion.

Operating profit (adjusted) rose marginally to $128 million from $127 million in the fourth quarter of 2010. It was positively impacted by continued improvement in price mix and cost productivity.

For full year 2011, the company's profits dipped to $4.99 per share compared with $7.97 per share in 2010. Excluding special items, profits were $2.05 per share compared with $4.47 per share in 2010. It was also significantly lower than the Zacks Consensus Estimate of $9.21 per share.

Sales in the year went up 2% to $18.7 billion, which was in line with the Zacks Consensus Estimate. Operating profit declined to $792 million compared with $1.0 billion in 2010, mainly driven by significantly higher material and oil-related costs.

For full year 2012, Whirlpool expects to report earnings per share of $5.00 to $5.50. However, excluding restructuring charges and Brazilian tax credits, the company anticipates reporting earnings per share of $6.50 to $7.00.

Regional Results

Sales in North America rose a meager 1% to $2.6 billion. Operating profit improved to $202 million from $53 million in the previous year. It was favorably affected by the implementation of previously announced price increases and improved product mix that more than offset lower industry volumes, higher material costs and the impact from lower production volumes. Whirlpool expects U.S. industry unit shipments to increase in the range of 0%-3% in 2012.

Sales in Europe, Middle East and Africa fell 8% to $848 million. The region had an operating loss of $32 million in the quarter compared to a profit of $29 million in the prior-year period. The decline in operating profit was attributable to the ongoing financial crisis Europe, which led to weak consumer demand across the euro zone, higher material costs, lower production to adjust to lower industry demand and unfavorable product price/mix. As a result, the company expects industry unit shipments to decrease in the range of 2%-5% in 2012.

Sales in Latin America dipped 5% to $1.3 billion. Operating profit decreased to $155 million compared with $193 million in the previous year quarter as favorable product price/mix was offset by lower monetization of tax credits, higher material costs, unfavorable currency and reduced production levels. However, the company expects appliance industry shipments in the region to increase in the range of 2%-5% for full-year 2012.

Sales in Asia decreased 2% to $200 million. Operating profit went down to $2 million from $4 million in the fourth quarter of 2010 as favorable product price/mix was offset by higher material costs and weak consumer demand in India. However, the company expects industry unit shipments in Asia to increase 2%-4% in 2012.

Financial Position

Whirlpool had cash and cash equivalents of $1.1 billion as of December 31, 2011 compared with $1.4 billion as of December 31 2010. Long-term debt was flat at $2.5 billion as of December 31 2011 compared with the same as of December 31 2010.

The company generated cash flow of $530 million from operations in 2011, a decline from $1.1 billion in 2010 due to lower profit and declines in deferred taxes and payable (net) and accrued pension. Meanwhile, capital expenditures increased to $608 million from $593 million in 2010.

For full-year 2012, Whirlpool expects to generate free cash flow between $100 million and $150 million.

Our Take

Whirlpool is considered the largest home-appliances manufacturer in the world, ahead of Electrolux AB ( ELUXY ), LG, Samsung and General Electric Co. ( GE ). The company is placed among the leading home appliances makers in India and Europe.

Despite its market-leading position, we are concerned about the ongoing weakness in Europe and high customer concentration faced by the company. The company's large trade customers include Sears Holdings Corporation ( SHLD ), Lowe's Companies Inc. ( LOW ), The Home Depot, Inc. ( HD ), Casas Bahia, Best Buy Co. Inc. ( BBY ) and Ikea, who have significant leverage as buyers.

As a result, the shares of Whirlpool are currently maintaining a Zacks#3 Rank that translates into a "Hold" rating for the short term (1 to 3 months).


 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

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