Whirlpool (WHR) Hits 52-Week High on Robust Long-Term Goals

Whirlpool Corporation WHR, a leading manufacturer of home appliances, hit a 52-week high of $202.99 on Jun 14 before closing at $196.54. Whirlpool's robust product pipeline, solid innovations and cost productivity initiatives keep it on track to deliver long-term goals which boost investor's confidence. Let's now have a look at the company's stock performance and how its ongoing strategic endeavors are articulating its path.

When compared with the broader Zacks categorized Consumer Discretionary sector, shares of Whirlpool have grown 10.8% in the last three months, outperforming the sector's growth of 3.5%. Additionally, the company has a long-term growth rate of 15.9% making us confident of its inherent strength.

Factors Impacting Performance

Whirlpool is amongst those few companies that heavily invest in technology for producing differentiated products for their end consumers. This is evident from the company's deal with Amazon, to introduce voice-controlled home appliances. Additionally, the company is inclined toward boosting revenues from its core appliance business through expansions and investments. This in turn will fuel growth of its high-margin categories.

Speaking of margins, Whirlpool is striving to improve the same through a series of measures, including cost-based price increments and cost-reduction initiatives focused on improving business efficiency. In first-quarter 2017, Whirlpool's ongoing cost productivity along with cost-reduction and capacity-reduction initiatives remained on track and facilitated revenue growth in the North America and Latin America regions, benefitting the company's top-line performance.

Additionally, Whirlpool has outlined significant long-term targets through 2020, which is backed by brand strength and product portfolio. The company expects its growth efforts to boost consumer demand and lead to enhanced price mix. The management targets EBIT margin to exceed 10% by 2020 based on such expectations. Whirlpool also envisions earnings per share to grow by 10–15% each year alongside free cash flow generation of 5–6% of revenues by 2018.

Although the company's strategic initiatives have positively impacted the top-line performance, its bottom-line depicts altogether a different story. Whirlpool's first-quarter 2017 earnings lagged estimates for the third consecutive quarter and dipped year over year. Results were hurt by the raw material inflation and temporary integration challenges experienced by the European business. Based on the integration challenges, the company lowered the earnings forecasts for 2017.

Bottom Line

We believe that Whirlpool's long term targets, coupled with its strong brand portfolio would facilitate the improvement of its earnings as well as its overall performance.  Moreover, the cost curtailment plans of the company are quite noteworthy and are yielding significant results. Investors, however, need to wait and watch if these efforts can help the company sustain its momentum.

The Zacks Consensus Estimate for the company has been stable over the past 30 days at $3.57 and $15.08 for the second quarter and for fiscal 2017, respectively.

Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).

Other Key Picks

Investors may consider better-ranked stocks such as Best Buy Co., Inc. BBY, Big 5 sporting Goods Corporation BGFV and The Children's Place, Inc. PLCE, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Best Buy has an average positive earnings surprise of 33.8% in the trailing four quarters and a long-term earnings growth rate of 11.8%.

Big 5 sporting Goods has an average positive earnings surprise of 94.5% in the trailing four quarters and a long-term earnings growth rate of 12%.

The Children's Place has an average positive earnings surprise of 36.6% in the trailing four quarters and a long-term earnings growth rate of 8%.

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