Yahoo Finance Whirlpool's (NYSE:WHR) Q2 Sales Beat Estimates, Provides Encouraging Full-Year Guidance
Home appliances manufacturer Whirlpool (NYSE:WHR) beat analysts' expectations in Q2 CY2024, with revenue down 16.8% year on year to $3.99 billion. The company's full-year revenue guidance of $16.9 billion at the midpoint also came in slightly above analysts' estimates. It made a GAAP profit of $2.21 per share, improving from its profit of $1.54 per share in the same quarter last year.
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Whirlpool (WHR) Q2 CY2024 Highlights:
Revenue: $3.99 billion vs analyst estimates of $3.96 billion (small beat)
EPS: $2.21 vs analyst estimates of $2.16 (2.3% beat)
The company reconfirmed its revenue guidance for the full year of $16.9 billion at the midpoint
Gross Margin (GAAP): 15.7%, down from 17% in the same quarter last year
Free Cash Flow of $275 million is up from -$988 million in the previous quarter
Market Capitalization: $5.54 billion
Credited with introducing the first automatic washing machine, Whirlpool (NYSE:WHR) is a manufacturer of a variety of home appliances.
Electrical Systems
Like many equipment and component manufacturers, electrical systems companies are buoyed by secular trends such as connectivity and industrial automation. More specific pockets of strong demand include Internet of Things (IoT) connectivity and the 5G telecom upgrade cycle, which can benefit companies whose cables and conduits fit those needs. But like the broader industrials sector, these companies are also at the whim of economic cycles. Interest rates, for example, can greatly impact projects that drive demand for these products.
Sales Growth
Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Whirlpool struggled to generate demand over the last five years as its sales dropped by 2.4% annually, a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Whirlpool's recent history shows its demand has stayed suppressed as its revenue has declined by 6.9% annually over the last two years.
This quarter, Whirlpool's revenue fell 16.8% year on year to $3.99 billion but beat Wall Street's estimates by 0.8%. Looking ahead, Wall Street expects revenue to decline 12.5% over the next 12 months.
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Operating Margin
Whirlpool was profitable over the last 5 years but held back by its large expense base. It demonstrated paltry profitability for an industrials business, producing an average operating margin of 5.1%. This result isn't too surprising given its low gross margin as a starting point.
Analyzing the trend in its profitability, Whirlpool's annual operating margin decreased by 4 percentage points over the last 5 years. The company's performance was poor no matter how you look at it. It shows operating expenses were rising and it couldn't pass those costs onto its customers.
This quarter, Whirlpool generated an operating profit margin of 3.3%, down 3.1 percentage points year on year. Since Whirlpool's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because its general expenses like sales, marketing, R&D, and administrative overhead increased.
EPS
We track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Sadly for Whirlpool, its EPS declined more than its revenue over the last five years, dropping by 11.1% annually. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Diving into the nuances of Whirlpool's earnings can give us a better understanding of its performance. As we mentioned earlier, Whirlpool's operating margin declined by 4 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Whirlpool, its two-year annual EPS declines of 15.7% show it's continued to underperform. These results were bad no matter how you slice the data.
In Q2, Whirlpool reported EPS at $2.21, up from $1.54 in the same quarter last year. This print beat analysts' estimates by 2.3%. Over the next 12 months, Wall Street expects Whirlpool to grow its earnings. Analysts are projecting its EPS of $7.89 in the last year to climb by 49.2% to $11.77.
Key Takeaways from Whirlpool's Q2 Results
It was good to see Whirlpool's full-year revenue forecast beat analysts' expectations. We were also glad this quarter's revenue outperformed Wall Street's estimates. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $98.70 immediately following the results.
Whirlpool may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
