Whirlpool Reports Mixed 4Q - Analyst Blog

Whirlpool Corporation (WHR) reported net earnings of $171 million or $2.19 per share for the last quarter of 2010, showing marked improvement compared with $95 million or $1.24 per share reported during the same period last year. Net earnings, reported by the company in the 2010 quarter, include a $10 million or $0.08 per share gain from the sale of a brand.

Excluding the special items, adjusted net earnings were $2.11 per share, improving substantially from last year's $1.67. However, fourth quarter adjusted earnings failed to beat the Zacks Consensus Estimate of $2.27.

Quarterly revenues grew marginally by 4% on a year-over-year basis to $5.04 billion. Reported revenues thus exceeded the Zacks Revenue Estimate of $4.87 billion.

Operating income for the quarter totaled $202 million, up slightly from previous year's $199 million, mainly driven by cost reduction and productivity initiatives, increased monetization of certain tax credits, higher unit volume and lower incentive compensation but partially offset by high material costs and lower product or price mix.

However, adjusted operating income for the fourth quarter 2010 amounted to $192 million deteriorating from $212 million during the corresponding quarter in 2009.

Performance by Region

Revenues from Whirlpool North America decreased 1% year-over-year to $2.6 billion. Unit shipments of major appliances increased 4% in the U.S. industry.

The adjusted operating profit declined sharply to $43 million from $145 million last year due to unfavorable product price/mix, higher material costs and lower production volumes, partly offset by cost reduction and productivity initiatives and lower incentive compensation. For full year 2011, the company expects unit shipments in the U.S. industry to increase 2%–3%.

Whirlpool Europe posted revenues of $922 million, down 4% from the prior year. Excluding the effects of currency, sales increased 4% driven by an estimated 2% year-over-year growth in the overall industry unit demand.

Operating profit in the region improved to $29 million from $19 million in the fourth quarter of 2009. The year-over-year improvement was primarily attributed to cost reduction and productivity initiatives along with higher unit volumes, partially offset by lower price or mix and higher material costs.  For full year 2011, the company projects industry growth of roughly 2%–4% in Europe.

Revenues in the Latin American region grew 18% to $1.4 billion. Excluding currency translation effects, sales from Whirlpool Latin America increased about 17% during the same period.

Operating profit rose to $193 million from $138 million in the previous year, driven by increased monetization of certain tax credits, cost reductions actions and productivity initiatives, offset partially by higher material costs and unfavorable price/mix. For full year 2011, the company expects Brazilian appliance shipments to increase around 5%–10%.

Revenues in the Asian region climbed up 9% to $204 million, while it increased just 4% excluding impact of fluctuations in currency. Whirlpool Asia's operating profit dropped to $4 million from the year-ago level of $6 million mainly because of higher material costs. For full year 2011, Whirlpool forecasts a 6%–8% expansion in unit shipments in Asia.

Full Year 2010 Summary

Whirlpool's net earnings for the full year 2010 were $7.97 per share compared with $4.34 per share in 2009. Adjusted earnings per share improved significantly to $9.65 from $5.01 in 2009. Adjusted earnings beat the Zacks Consensus Estimate of $7.97.

Revenues for the year were $18.4 billion, up 7% from the prior year.  Excluding the impact of foreign currency translation, sales increased 5% on a year-over-year basis. Full year revenues marginally exceeded the Zacks Revenue estimate of $18.2 billion.

Financial Position

Whirlpool had cash and cash equivalents of $1.37 million as of December 31, 2010, almost unaffected from $1.38 billion as of December 31, 2009. Long-term debt was $2.20 billion at 2010 end compared with $2.50 billion at 2009 end.

Cash flow from operating activities deteriorated to $1.08 billion in 2010 from $1.55 billion a year ago, primarily due to higher inventories. Free cash flow was $502 million compared with approximately $1.1 billion last year. Meanwhile, capital expenditures increased to $593 million during the year from $541 million in 2009.

Outlook

Whirlpool Corporation expects earnings per share for the full-year 2011 in the range of $12.00–$13.00, incorporating the per share impact of $4.00 from U.S. energy tax credits.

Cash flow for the year is expected to vary in the $400 million to $500 million range, including U.S. cash pension contributions of approximately $300 million.

Our Take

Whirlpool's wide range of products attracts a wide range of customers worldwide. Alongside, the company emphasizes on constant upgrade of its products.

However, a deteriorating balance sheet and high inventory levels may pose long-term threats to the company, thereby limiting its business expansion plans. We give a short-term Hold (Zacks #3 Rank) recommendation on the shares of Whirlpool Corp.

Overview

Based in Michigan, Whirlpool Corporation is one of the largest manufacturers of home appliances in the world. Its products are sold across the globe under some well-known brand names such as Whirlpool, Maytag, KitchenAid, Roper, Jenn-Air, Amana, Brastemp, Consul and Bauknecht. The company's key competitors include Sweden-based ElectroluxAB (ELUXY), Hong-Kong-based Haier Electronics Group Co., Ltd. (HRELF), Korea-based Samsung and a handful of other Chinese manufacturers.

 
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