Whirlpool Q4 Earnings Miss, Up Y/Y

Zacks

Whirlpool Corporation’s (WHR) adjusted earnings per share came in at $2.97 in the fourth quarter of 2013, which was higher than $2.29 earned in the year-ago quarter but fell short of the Zacks Consensus Estimate of $3.00.

The year-over-year improvement was primarily driven by the company’s sustained focus on cost and capacity reduction initiatives and revenue growth. Moreover, reported earnings rose to $2.26 per share from $1.52 in the year-ago period.

Revenues in the quarter increased 6.2% year over year to $5,090.0 million. The rise in the top line was primarily driven by increased demand for the company’s innovative products. Region-wise, North America and Latin America strongly contributed to total revenue.

Moreover, Whirlpool registered year-over-year sales growth of nearly 7%, after excluding the impact of foreign currency translation and lower monetization of Brazilian (:BEFIEX) tax credits. The company’s revenues surpassed the Zacks Consensus Estimate of $4,981.0 million.

Gross profit improved 11.9% year over year to $909.0 million from $812.0 million a year ago. Gross margin expanded 100 basis points (bps) to 17.9% from 16.9% in the year-ago quarter. Adjusted operating profit rose 24.9% to $386.0 million from $309.0 million in the year-ago quarter. Consequently, adjusted operating margin expanded 170 bps to 7.6% versus 6.4% in the fourth quarter of 2012.

Tidbits of Fiscal 2013

For fiscal 2013, the company reported adjusted earnings per share of $10.02 compared to $7.05 earned in fiscal 2012. However, it missed the Zacks Consensus Estimate of $10.05 by 3 cents. Net sales for the year totaled $18,769.0 million, up 3.5% year over year and above the Zacks Consensus Estimate of $18,656.0 million.

Q4 Regional Performance

Revenues from North America grew 9% year over year at $2.7 billion. Adjusted operating profit increased 29.2% to $301.0 million in the quarter from $233.0 million in fourth-quarter 2012.

The year-over-year growth in operating profit was due to higher sales, better cost productivity and gains from cost and capacity reduction measures, which nullified the impact of increased material costs and investments in marketing, technology and products. Going ahead, the company expects its U.S. industry shipments to increase by 5%–7% in fiscal 2014.

Revenues from Latin America grew 7.7% to $1.4 billion on a year-over-year basis. Moreover, excluding the effects of currency translation and Brazilian tax credits, revenues were up over 8%. Adjusted operating income was up 9.2% to $130.0 million, as higher sales, better product price and mix and cost productivity initiatives were partially offset by increased material costs and unfavorable foreign currency exchange rate. The company expects flat appliance industry shipments in Latin America in fiscal 2014.

Revenues from Europe, Middle East and Africa grew 6.7% to $847.0 million in the quarter. Fourth-quarter adjusted operating income for the region was $10.0 million, up 25% from $8.0 million in the year-ago quarter, benefitting from higher sales as well as cost and capacity reduction measures. Whirlpool expects industry unit shipments in fiscal 2014 to range between flat to a 2% increase.

Revenues from Asia fell 12.8% to $177.0 million from $203.0 million in fourth-quarter 2012. Excluding the negative impact of currency translation, revenues dropped close to 7%. Adjusted operating income shot up 42.9% year over year to $10.0 million as the benefit from improved product price and mix and ongoing cost productivity initiatives fully offset the higher material costs, unfavorable foreign currency translation and lower unit volumes. The company expects industry shipments in the region to range from flat to 3% in fiscal 2014.

Financial Position

Whirlpool had cash and cash equivalents of $1,380.0 million as of Dec 31, 2013 compared with $1,168.0 million as of Dec 31, 2012. Long-term debt was $1,846.0 million as of Dec 31, 2013 compared with $1,944.0 million as of Dec 31, 2012.

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., generated a cash flow of $1,262.0 million from operations in 2013. Meanwhile, the company spent $513.0 million toward capital expenditure during the year. Currently, Whirlpool has a negative free cash flow of $690.0 million.

Outlook

Following a strong fiscal 2013, Whirlpool came up with a favorable guidance for 2014. For full-year 2014, Whirlpool expects earnings per share (:GAAP) in the range of $11.05–$11.55. However, considering the impact of restructuring charges, Brazilian tax credits and investment expenses, the company anticipates adjusted earnings per share of $12.00–$12.50.

Other Stocks Worth Considering

Currently, Whirlpool carries a Zacks Rank #4 (Sell). Better-performing stocks in the retail space include Haverty Furniture Companies Inc. (HVT) and Tempur Sealy International Inc. (TPX). Both of these carry a Zacks Rank #2 (Buy).

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