Whirlpool (WHR) Raises GAAP Forecast on Q2 Earnings Beat - Analyst Blog

Whirlpool Corporation WHR reported better-than-expected earnings for the second quarter of 2015, wherein adjusted earnings per share of $2.70 surpassed the Zacks Consensus Estimate of $2.67 and also rose 3.1% year over year.

Whirlpool Corporation - Earnings Surprise | FindTheCompany

The improvement in earnings was mainly driven by the company’s sustained focus on cost and capacity reduction initiatives, encouraging price/mix and gains from the integration of acquired assets. This was partly offset by the ongoing currency headwinds as well as an undermined Brazilian demand.  

However, on a reported basis, the company’s earnings fell 1.8% year over year to $2.21 per share.

Revenues came in at $5,208 million, up over 11% from the comparable year-ago quarter but below the Zacks Consensus Estimate of $5,245 million. On a currency-neutral basis, Whirlpool registered year-over-year sales growth of nearly 25%, mainly on the back of contribution from acquisitions.

During the quarter, gross profit rose nearly 15% to $905 million, while gross margin expanded 60 basis points (bps) to 17.4%.

Adjusted operating profit for the quarter rose 7.6% to $355 million from $330 million in the year-ago quarter, while operating margin contracted 30 bps year over year to 6.8%. Negative impact of unfavorable exchange rates more than offset the gains from acquisition integration activities, ongoing cost and capacity reduction initiatives and cost productivity.

Regional Performance

Revenues from North America improved marginally to $2.7 billion while growing more than 1% excluding currency impact. Adjusted operating profit increased 1.8% year over year to $290 million, while operating margin expanded 20 bps to 10.8%. During the quarter, gains from ongoing cost productivity and unit volume increases were counteracted by currency headwinds. The company expects its North American industry shipments to increase by 4% in 2015.

Revenues from Latin America fell 18.2% year over year to $0.9 billion. Excluding the negative effects of currency translation, revenues were up 1%. Adjusted operating income declined 58.6% to $36 million as better product price/mix and gains from cost and capacity reductions were more than offset by adverse currency impact and lower unit volumes due to weak demand in Brazil. The company expects industry unit shipments in Latin America to be down by nearly 15% in 2015.

Revenues from EMEA grew 79% to $1.3 billion from $0.7 billion reported in the prior-year quarter. On a currency-neutral basis revenue for the segment rose more than 127%. Second-quarter adjusted operating income was $56 million, compared with $2 million in the year-ago quarter, benefiting from acquisition integration activities, enhanced cost productivity as well as gains from cost and capacity reduction measures, slightly offset by negative currency impact. Whirlpool expects industry unit shipments in 2015 to range between flat to a 2% increase.

Revenues from Asia grew 80.6% to $381 million in second-quarter 2015 from $211 million in the prior-year quarter. Adjusted operating profit rose substantially to $31 million from $4 million a year ago, driven by synergies from acquisition integration activities, benefits from cost and capacity reductions and ongoing cost productivity. The company expects industry shipments in the region to be flat in 2015.

Financial Position

Whirlpool had cash and cash equivalents of $691 million as of Jun 30, 2015 and long-term debt of $3,750 million.

This largest home-appliances manufacturer in the world, which comes ahead of ElectroluxAB, LG, Samsung, General Electric Co. GE and Haier Electronics Group Company Ltd., used $397 million of cash in operating activities in the first half of 2015. Meanwhile, the company’s capital expenditure for the period was $268 million. As of Jun 30, 2015, Whirlpool had negative free cash flow of $619 million.

Guidance

Driven by gains from investments in Latin America, Whirlpool raised its GAAP earnings forecast for 2015 to $9.50–$10.50 per share, from $9.00–$10.00 guided earlier. However, it retained its adjusted earnings guidance in the range of $12.00–$13.00 per share.

The company also maintained its free cash flow guidance of nearly $700 million for 2015, including restructured cash outlays of up to $250 million, capital expenditures in the range of $750–$800 million and U.S. pension contributions of nearly $72 million.

Currently, Whirlpool carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Better-ranked stocks in the broader consumer goods sector include ITT Corporation ITT with a Zacks Rank #1 (Strong Buy), and Carlisle Companies Incorporated CSL, carrying a Zacks Rank #2 (Buy).

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