It has been about a month since the last earnings report for Whirlpool (WHR). Shares have lost about 2% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Whirlpool Q2 Earnings Surpass Estimates, Sales Miss
Whirlpool posted mixed second-quarter 2022 results, wherein earnings beat the Zacks Consensus Estimate, while the top line missed the same. Both metrics declined year over year. Results were hurt by the ongoing challenging environment, rising costs and sluggish demand. Consequently, management trimmed the 2022 view.
An Insight Into Q2
The appliance maker delivered adjusted earnings of $5.97 per share, declining 10.1% from $6.64 in the year-ago quarter. However, the bottom line surpassed the Zacks Consensus Estimate of $5.23, marking its 16th straight earnings beat.
Net sales of $5,097 million dropped 4.3% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $5,247 million. Excluding the unfavorable impacts of foreign exchange, net sales amounted to $5,203 million, down 2.3% year over year. Supply-chain disruptions and weak demand hurt sales, partly offset by a favorable product price/mix.
Go-to-market actions generated 675 basis points (bps) of price/mix, along with cost-based pricing actions.
The gross profit for second-quarter 2022 was $897 million, down 17.7% from $1,090 million reported in the year-ago quarter.
Adjusted EBIT of $461 million declined 24.1% from $607 million in the year-ago quarter. The adjusted EBIT margin of 9% contracted 240 bps year over year.
Net sales for the North America segment decreased 2.6% year over year to $2,964 million. Excluding the currency impact, sales in the region dropped 2.3%. The segment’s EBIT fell 25.1% year over year to $417 million, while the EBIT margin contracted 420 bps to 14.1% due to rising cost inflation.
Net sales for the EMEA segment were down 19.4% year over year to $1,008 million. Excluding currency impacts, sales in the region dipped 10.3%. The metric was hurt by a drab demand stemming from the adverse impacts of the war in Ukraine. The segment’s EBIT plunged 93.5% year over year to $2 million. The EBIT margin of 0.2% contracted 230 bps year over year due to lower volume and cost inflation.
Net sales from Latin America increased 3.1% year over year to $787 million, driven by cost-based pricing efforts. Excluding the currency impacts, sales in the region fell 0.5%. The segment’s EBIT of $57 million declined 23% from the year-ago period’s levels. The EBIT margin contracted 250 bps to 7.2%, mainly affected by inflation, somewhat offset by cost-based pricing efforts.
Net sales in Asia grew 25.7% year over year to $338 million mainly due to the divestiture of Whirlpool China. Excluding the currency impacts, sales for the region were up 30.5%. The segment’s EBIT of $23 million reflected a 403.4% surge from $4 million reported in the year-ago quarter. The segment’s EBIT margin of 6.8% expanded 510 bps from the prior-year quarter, driven by cost-based price increases and top-line growth.
Other Financial Details
As of Jun 30, 2022, Whirlpool had cash and cash equivalents of $1,642 million, long-term debt of $4,831 million, and a stockholders’ equity of $4,036 million, excluding non-controlling interests of $173 million.
In the first six months of 2022, Whirlpool used cash of $180 million from operating activities. It reported an adjusted negative free cash flow of $397 million. WHR incurred a capital expenditure of $217 million in the same period.
In the reported quarter, management returned $400 million in forms of share buybacks and dividends.
For 2022, Whirlpool envisions a net sales decline of 6% to $20.7 billion, which compares unfavorably with the previously stated 2-3% growth. On a GAAP and ongoing basis, Whirlpool expects earnings per share of $9.50-$11.50 on a GAAP basis and $22.00-$24.00 on an adjusted basis, down from $24.00-$26.00 mentioned earlier. Management anticipates a tax rate of 34-36% on a GAAP basis and 21-23% on an adjusted basis compared with the aforementioned 24-26% for 2022 on both GAAP and adjusted basis.
Whirlpool expects cash provided by operating activities of $1.85 billion compared with the earlier stated $1.95 billion. Ffree cash flow is likely to be $1.25 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 -13.43% due to these changes.
Currently, Whirlpool has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Whirlpool has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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