Raymond James Downgrades Whirlpool to ‘Market Perform’

Whirlpool (WHR) has a market cap of $14.5 billion. It rose by 1.4% to close at $190.26 per share on July 25, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 6.9%, 6.4%, and 31.1%, respectively, on the same day. WHR is trading 11.0% above its 20-day moving average, 10.1% above its 50-day moving average, and 18.6% above its 200-day moving average.

The First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.34% of its holdings in Whirlpool. The ETF tracks an index that selects and weights value stocks from the S&P 500 Value Index using fundamental factors including sales, book value, and cash flows. The YTD price movement of FTA was 8.8% on July 25.

The SPDR S&P 500 ETF (SPY) invests 0.07% of its holdings in Whirlpool. The ETF tracks a market-cap-weighted index of US large- and mid-cap stocks selected by the S&P Committee.

The market caps of Whirlpool’s competitors are as follows:

• Spectrum Brands Holdings (SPB)—$7.0 billion
• Sears Holdings (SHLD)—$1.6 billion

Raymond James has downgraded Whirlpool rating to “market perform” from “strong buy.” TheStreet Ratings rated the stock as a “buy” with a score of B.

Whirlpool reported 2Q16 net sales of $5.20 billion, a fall of 0.19% from its net sales of $5.21 billion in 2Q15. The company’s gross margin and operating profit rose by 7.2% and 34.1%, respectively, between 2Q15 and 2Q16.

Its net income and EPS (earnings per share) rose to $320.0 million and $4.15, respectively, in 2Q16, as compared to $177.0 million and $2.21, respectively, in 2Q15.

Whirlpool’s cash and cash equivalents and inventories rose by 24.2% and 22.3%, respectively, between 4Q15 and 2Q16. Its current ratio rose to 0.98x, and its long-term debt-to-equity ratio fell to 0.96x in 2Q16, as compared to 0.95x and 0.99x, respectively, in 4Q15.

The company has made the following projections for fiscal 2016:

• EPS in the range of $11.50–$12
• ongoing business EPS in the range of $14.25–$14.75
• free cash flow in the range of $700 to $800 million, which includes restructuring cash outlays of up to $200 million, legacy product warranty and liability costs of $155 million, and capital spending of $700 million to $750 million.
• cash from operating activities in the range of $1.4 billion to $1.6 billion
• industry unit shipments to increase by 5%–6% in the United States, to be flat to up 2% in EMEA (Europe, the Middle East, and Africa), to fall by 10% in Brazil, and to be flat in Asia

In the next part, we’ll discuss Mondelez International.