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Gabelli & Co. Downgrades Whirlpool Corporation to ‘Hold’

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Price movement

Whirlpool (WHR) has a market cap of $13.4 billion. It rose 1.9% to close at $169.92 per share on September 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.5, -8.7%, and 17.7%, respectively, on the same day.

WHR is trading 5.8% below its 20-day moving average, 5.8% below its 50-day moving average, and 3.2% above its 200-day moving average.

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Related ETFs and peers

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 such as sales, book value, and cash flows. The YTD price movement of FTA was 11.0% on September 12.

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-cap and mid-cap stocks selected by the S&P Committee.

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

  • Spectrum Brands Holdings (SPB) — $7.8 billion
  • Sears Holdings (SHLD) — $1.4 billion

Whirlpool’s rating

Gabelli & Co. has downgraded Whirlpool’s rating to “hold” from “buy.”

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Performance of Whirlpool in 2Q16

Whirlpool (WHR) 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 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, compared with $177.0 million and $2.21, respectively, in 2Q15.

Whirlpool’s cash and cash equivalents and inventories rose 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, compared with 0.95x and 0.99x, respectively, in 4Q15.

Projections

Whirlpool (WHR) 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 million–$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–$750 million
  • cash from operating activities in the range of $1.4 billion–$1.6 billion
  • industry unit shipments to increase by 5%–6% in the United States, to be flat to up 2% in EMEA,[1. Europe, the Middle East, and Africa] to fall by 10% in Brazil, and to be flat in Asia

Next, we’ll discuss Blue Buffalo Pet Products (BUFF).

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