Yahoo Finance What's Behind Whirlpool's (WHR) Sudden Stock Market Rally?
Shares of Whirlpool Corporation WHR registered a rally of 17.1% on Jun 26, 2024, after the market’s speculations about Bosch’s interest in bidding for the U.S. appliances manufacturer surfaced. Following the news, WHR soared as high as 19.1% to reach $103.62 before closing at $101.91.
The media reports suggested that Bosch, the German engineering and auto parts company, has been in discussions with its advisors for a possible bid to acquire Whirlpool, which currently has a market capitalization of $5.6 billion. However, management of both companies did not comment on the matter.
Bosch’s interest in acquiring Whirlpool comes from its intent to diversify beyond the automotive business after witnessing a slowdown in electric vehicle sales. The company is looking to grow its share in the home appliances business amid the tough competition from the Asia market. Given Bosch’s expansion intent, Whirlpool comes around as an easy choice for the bid due to its strong market positioning, with renowned washing machine and refrigerator brands like Maytag and KitchenAid.
We note that shares of Whirlpool lost a significant 38.1% in the last 12 months before yesterday’s rally. The Zacks Rank #4 (Sell) company’s shares underperformed the Zacks Household Appliances industry’s decline of 36.4% and the broader Zacks Consumer Discretionary sector’s growth of 8.1%.
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Whirlpool’s Hardships
WHR’s struggle is evident from the ongoing challenges due to the soft discretionary spending environment. The company recently saw significant restructuring activities, concluding the strategic review of its EMEA business. As part of this, Whirlpool merged its European operations with a Turkish competitor, Arçelik. Additionally, WHR divested the Middle East & North Africa portion of its EMEA business.
Moreover, Whirlpool is on track with early and decisive actions to protect margins and productivity amid the ongoing supply-chain constraints and inflationary pressures. It has implemented cost takeout actions, including curtailing structural and discretionary costs, capturing raw material deflation opportunities, effectively managing working capital and syncing supply chain and labor levels with demand. WHR recently announced a plan to cut about 1,000 jobs to lift profit margins.
Consumer Sentiment Hurts Performance & Outlook
Whirlpool has been witnessing global demand softness and an unfavorable price/mix. In the first quarter of 2024, the company witnessed soft demand trends across Europe, thanks to the persistent softness in demand trends and unfavorable price/mix. Additionally, the top-line performance across North America was impacted by an unfavorable price/mix.
WHR indicated that a challenging market environment, lower demand trends and an adverse price/mix will continue to weigh on its performance in 2024. Management expects a 13.1% year-over-year decline in net sales to $16.9 billion for 2024. On a GAAP and ongoing basis, Whirlpool expects earnings per share of $5.00-$7.00 and $13.00-$15.00, respectively. Notably, in 2023, WHR reported earnings per share of $8.72 on a GAAP basis and $16.16 on an ongoing basis.
The Zacks Consensus Estimate for Whirlpool’s 2024 revenues and earnings indicates declines of 13.6% and 23.5%, respectively, from the year-ago quarter’s actuals.
Conclusion
While the speculation was not confirmed by either company, shares of Whirlpool witnessed a strong rally in a long time due to the news. Now, it remains to be seen if the Whirlpool stock can hold up to this rally, given its bleak fundamentals. As for Bosch, this could be a significant opportunity to expand in the home appliances segment if a deal emerges.
Discretionary Stocks to Watch
Some better-ranked Consumer Discretionary companies are G-III Apparel Group GIII, Crocs CROX and Guess GES.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII’s fiscal 2024 revenues indicates an increase of 3.3% from the year-ago period’s reported level.
Crocs, a leading footwear brand for comfort and style, currently has a Zacks Rank of 2 (Buy). CROX has a trailing four-quarter earnings surprise of 17.1%, on average.
The Zacks Consensus Estimate for CROX’s 2024 sales and EPS indicates increases of 4.4% and 5.2%, respectively, from the year-ago period’s reported levels.
Guess designs, markets, distributes and licenses casual apparel and accessories for men, women and children, per the American lifestyle and European fashion sensibilities. GES carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Guess’s current financial-year sales suggests growth of 11.7% from the year-ago reported figures. GES has a trailing four-quarter earnings surprise of 31%, on average.
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Whirlpool Corporation (WHR) : Free Stock Analysis Report
Guess?, Inc. (GES) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
G-III Apparel Group, LTD. (GIII) : Free Stock Analysis Report
