Why is Whirlpool (WHR) down 9% since its last earnings report?

It’s been a month since Whirlpool’s (WHR) last earnings report. Shares have lost about 9% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Whirlpool poised 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 key drivers.

Best estimates for Whirlpool’s first quarter earnings, y/y sales decline

Whirlpool reported first-quarter 2024 results, with sales and earnings surpassing the Zacks Consensus Estimate. However, the company’s profits and profits declined year by year. The results benefited from market share gains, industry recovery and gains from cost-elimination measures, offset by price/mix disadvantages.

Details of the first quarter

The home appliances maker reported first-quarter adjusted earnings of $1.78 per share, which topped the Zacks Consensus Estimate of $1.61 but declined 33.1% year over year.

Net sales of $4,490 million topped the Zacks Consensus Estimate of $4,405 million, but declined 3.4% year-over-year. Excluding the unfavorable impact of foreign exchange rates, net sales were $4,446 million, down 4.4% year-over-year.

Quarterly gross profit was $642 million, down 15.9% from the $763 million reported in the year-ago quarter. Gross margin decreased 210 basis points (bps) year-over-year to 14.3%.

Current EBIT of $195 million was down 22.3% from $251 million in the year-ago quarter. Current EBIT margin of 4.3% decreased by 110 basis points year over year due to the drive to eliminate costs.

Regional performances

North America MDA segment net sales decreased 8.1% year-over-year to $2,428 million due to unfavorable pricing/mix and a 2% industry decline. Excluding currency, net sales decreased 8.1% year over year. Segment EBIT declined 49.2% year-over-year to $135 million, while EBIT margin declined 450 basis points to 5.6%, due to a promotional environment partially negated by cost-elimination efforts.

Net sales in the MDA Europe segment decreased 5% year-over-year to $804 million. Excluding currency, sales declined 6.9% year-on-year as demand trends in Europe continued to soften. The segment’s EBIT loss of $9 million widened from the operating loss of $5 million reported in the year-ago quarter. This was due to unfavorable pricing/mix.

MDA net sales in Latin America increased 12% year-over-year to $837 million. Excluding currency, segment sales increased 8.4% year-over-year, driven by significant share gains in the region, which more than offset the unfavorable price/mix. Segment EBIT of $65 million increased 80.6% year-over-year. EBIT margin increased 300 basis points year-over-year to 7.8% due to increased volumes and cost-cutting actions.

Net sales at MDA Asia fell 2.4% year over year to $239 million. Excluding currency effects, sales declined 1.7% as an unfavorable price/mix significantly offset higher volumes driven by share gains. Segment EBIT of $11 million reflects an increase of 37.5% compared to the $8 million reported in the prior-year quarter. Segment EBIT margin of 4.6% increased 130 basis points from 3.3% in the prior-year quarter, benefiting from cost-elimination efforts, partially negated by unfavorable pricing/mix.

Net sales at SDA Global increased 7.1% year-over-year to $182 million. Excluding the impact of currency, sales increased 6.5%, driven by growth in key countries and direct sales to consumer businesses, offset by unfavorable price/mix. Segment EBIT of $33 million reflects an increase of 73.7% compared to the $19 million reported in the prior-year quarter. Segment EBIT margin of 18.1% increased 690 basis points from 11.2% in the prior-year quarter, driven by cost activities and volume growth.

The story continues

Other financial details

In the first quarter of 2024, Whirlpool used $873 million of cash from operations. There was a negative free cash flow of USD 988 million. WHR incurred capital expenditures of $115 million during the same period.

In the first quarter of 2024, the company returned $95 million in cash to shareholders in the form of dividends.

Perspectives

Whirlpool released guidance for 2024. It forecast net sales of $16.9 billion, suggesting a decline of 13.1% from the year-ago actual figure. The company anticipates a continuing EBIT margin of 6.8%, up from 6.1% recorded in 2023.

Consistent with generally accepted accounting principles, Whirlpool expects earnings per share in the range of $5.00-$7.00 and $13.00-$15.00, respectively. Adjusted earnings guidance includes cost activities of $300 million to $400 million. In 2023, WHR reported GAAP and ongoing earnings per share of $8.72 and $16.16, respectively. Management anticipates the GAAP and adjusted tax rate to be 25% and 0%, respectively.

How have estimates changed since then?

It turns out that estimate revisions have been on a downward trend over the past month.

As a result of these changes, the consensus estimate moved by -24.37%.

VGM results

Right now, Whirlpool has a weak Growth Score of F, but its Momentum Score is doing much better at B. Following the exact same trajectory, the stock was rated a B on the value side, putting it in the top 40% for this investment strategy .

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. It’s no surprise that Whirlpool has a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

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