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Goldman Sachs Downgrades Whirlpool to ‘Neutral’

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Price movement

Whirlpool (WHR) has a market cap of $12.8 billion. It fell 1.8% to close at $170.85 per share on January 27, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -8.0%, -7.0%, and -6.0%, respectively, on the same day.

WHR is trading 7.3% below its 20-day moving average, 2.9% below its 50-day moving average, and 0.86% below its 200-day moving average.

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Related ETF and peers

The First Trust Large Cap Value AlphaDex ETF (FTA) invests 0.72% of its holdings in Whirlpool. The YTD price movement of FTA was 2.0% on January 27.

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

  • Spectrum Brands Holdings (SPB) — $8.0 billion
  • Sears Holdings Corporation (SHLD) — $761.0 million

WHR’s rating

On January 27, 2017, Goldman Sachs downgraded Whirlpool’s rating to “neutral” from “conviction buy.” It also reduced the stock’s price target to $187.00 from $191.00 per share.

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Performance in 4Q16

Whirlpool (WHR) reported 4Q16 net sales of $5.7 billion—a rise of 1.7% compared to net sales of $5.6 billion in 4Q15. The company’s gross margin and operating margin narrowed by 110 basis points and 90 basis points, respectively, in 4Q16 compared to 4Q15.

Its net income remained at $180.0 million for 4Q16 and 4Q15. However, its EPS (earnings per share) rose to $2.36 in 4Q16 compared to $2.28 in 4Q15.

Fiscal 2016 results

In fiscal 2016, Whirlpool (WHR) reported net sales of $20.7 billion, a fall of 0.8% YoY (year-over-year). The company’s gross margin and operating margin rose by 10 basis points and 30 basis points, respectively, in 2016.

Its net income and EPS rose to $888.0 million and $11.50, respectively, in 2016 compared to $783.0 million and $9.83, respectively, in 2015.

Whirlpool’s cash and cash equivalents and inventories rose 40.5% and 0.2%, respectively, in 2016. Its current ratio rose to 0.96x in 2016 compared to 0.89x in 2015.

Projections

Whirlpool made the following projections for fiscal 2017:

  • EPS of $13.25–$14.25
  • ongoing business EPS of $15.25–$16.25
  • free cash flow of ~$1 billion
  • cash from operating activities in the range of $1.7 billion to ~$1.8 billion

Next, we’ll look at Greif (GEF).

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