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Whirlpool (WHR) Down on Q4 Earnings Miss, Issues '17 View (Revised)

Whirlpool CorporationWHR posted fourth-quarter 2016 results, wherein both the top and the bottom line increased year over year. However, earnings lagged estimates for the second consecutive quarter. Consequently, stock price of this largest home-appliances manufacturer in the world declined 3.3% in the pre-market trading session.

However, Whirlpool's shares have outperformed the Zacks categorized Consumer Discretionary sector over the past one year. Evidently, Whirlpool has surged 47.1% in the last one year, as compared to the sector's growth of 23.8%.

Q4 Highlights

Whirlpool's quarterly adjusted earnings per share of $4.33 jumped 5.6% year over year, gaining from leverage to the company's brands portfolio, product innovation and constant focus on cost productivity. However, the bottom line missed the Zacks Consensus Estimate of $4.52.

Whirlpool Corporation Price, Consensus and EPS Surprise

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

On a reported basis, the company's earnings were up 3.5% to $2.36 per share from $2.28 earned in the prior-year quarter.

Revenues came in at $5,656 million, up 1.7% from the comparable year-ago quarter revenues of $5,560 million. Additionally, revenues surpassed the Zacks Consensus Estimate of $5,582.3 million. Moreover, on a currency-neutral basis, Whirlpool registered sales growth of over 2%.

Adjusted operating profit in the quarter dropped 9.2% to $425 million from $468 million in the year-ago quarter, while the operating margin contracted 90 basis points to 7.5%. During the quarter, an adverse product price/mix and foreign currency headwinds almost fully neutralized the gains from increased unit volumes, acquisition synergies, ongoing cost productivity and cost- and capacity-reduction initiatives.

Regional Performance

Revenues from North America went up 6.9% year over year to $3.1 billion, while revenues grew more than 8% on a currency-neutral basis. However, the adjusted operating profit margin contracted 130 basis points (bps) to 11.1%. During the quarter, gains from ongoing cost productivity and improved unit volumes overshadowed the negative impact of unfavorable foreign exchange rates and adverse product price/mix. The company expects its North-American industry shipments to increase 4-6% in 2017.

Revenues from Latin America inched up 1.8% year over year to $860 million. Excluding the effects of currency translation, revenues dropped 7%. Adjusted operating margin of 8.1% increased 30 basis points, on the back of favorable price/mix and gains from cost and capacity reductions actions, slightly offset by unit volume declines. The company anticipates industry unit shipments in Brazil to be flat in 2017.

Revenues from EMEA descended 6.7% from the prior-year quarter to $1.4 billion. On a currency-neutral basis, revenues dropped 8%. Fourth-quarter adjusted operating margin was 3.3% down 240 basis points, largely due to currency effects and soft demand related to Brexit, and lower inventories and production. Apart from this, unfavorable price/mix, negative currency effects and unit volumes decline also played foul, which were only partly compensated by gains from acquisition synergies. Whirlpool estimates industry unit shipments growth in 2017 in the range of 1-2%.

Revenues from Asia grew 12.8% to $352 million in fourth-quarter 2016 from $312 million in the prior-year quarter. Excluding currency effects, revenues increased 18%. Adjusted operating margin expanded 170 basis points to 5.3%. Adverse product price/mix and higher investments in marketing, technology and products were more than offset by gains from ongoing cost productivity and growth in unit volumes. The company projects industry shipments in the region to be flat to up 2% in 2017.

Financial Position

Whirlpool had cash and cash equivalents of $1,085 million as of Dec 31, 2016, and long-term debt of $3,876 million.

The company generated $1,203 million as cash from operating activities in 2016. Meanwhile, the company's capital expenditure in the period was $660 million. As of Dec 31, 2016, Whirlpool had free cash flow of $630 million.

Also, during the year, Whirlpool made share buybacks worth $525 million, while it paid $294 million as dividends. Going forward, management plans to keep its share repurchases on in 2017.

Guidance

Management remains pleased with its ongoing growth strategies, disciplined operational execution and balanced capital allocation. Following the results, Whirlpool issued its forecasts for 2017, based on strong cost reductions and superb product portfolio. The company envisions adjusted earnings per share for 2017 in a range of $15.25-$16.25. On a GAAP basis, Whirlpool anticipates earnings in a range of $13.25-$14.25 for 2017. The Zacks Consensus Estimate for 2017 is currently pegged at $16.01.

The company anticipates generating free cash flow of about $1 billion for 2017, while the company expects its operating cash flows to range from $1,7-$1,75 billion. This guidance includes restructured cash outlays of up to $165 million, legacy product warranty and liability costs of $70 million, pension contributions of $45 million and capital expenditures of $700-$750 million.

Zacks Rank & Key Picks

Currently, Whirlpool carries a Zacks Rank #2 (Buy). Other well-ranked consumer discretionary stocks include AB Electrolux (publ) ELUXY , Francesca's Holdings Corporation FRAN and La-Z-Boy Incorporated LZB , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

AB Electrolux, with a long-term earnings growth rate of 4.1%, has grown 27.1% in the past one year.

Francesca's Holdings has an average earnings beat of 26.6% in the last four quarters. The company also has a long-term earnings growth rate of 13.8%.

La-Z-Boy has an average earnings beat of 5.7% in the last four quarters. Also, the company has witnessed positive estimate revisions over the past 60 days.

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(We are reissuing this article to correct a mistake. The original article, issued on Jan 26, 2017, should no longer be relied upon.)

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Whirlpool Corporation (WHR): Free Stock Analysis Report

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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 Nasdaq, Inc.


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

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