A JP Morgan Portfolio Switch: Whirlpool Upgraded, Mohawk Downgraded

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JPMorgan’s Michael Rehaut upgraded the rating for Whirlpool Corporation WHR from Neutral to Overweight, with a price target of $205, while downgrading the rating for Mohawk Industries, Inc. MHK from Overweight to Neutral, with a price target of $215.

Mohawk

The company’s shares gained 22 percent in 2015, versus a 1 percent decline in the S&P and an average gain of 3 percent in JPMorgan’s coverage universe. Year-to-date in 2016, Mohawk’s shares are down merely 2 percent, versus a 1 percent decline in the S&P and an average gain of 4 percent in JPMorgan’s coverage universe.

The company continues to represent “a solid, core long term holding in the sector,” analyst Michael Rehaut said. He added, however, that the Street EPS expectations for 2016 and 2017 appeared slightly aggressive.

The analyst expects the company to generate below-average EPS growth in 2017, which should limit relative outperformance of its stock over the next 12 months.

Whirlpool

The company’s shares declined by 24 percent in 2015, versus an average gain of 8 percent in JPMorgan’s coverage universe.

Although Whirlpool’s shares have outperformed year-to-date in 2016 [up 13 percent, versus an average decline of 6 percent in JPMorgan’s coverage universe], the stock continues to be 19 percent below its 52-week high, Rehaut pointed out. In comparison, Mohawk’s shares are only 13 percent below their 52-week high.

The stock is “attractive on a valuation basis relative to its 3-year averages,” the analyst commented, while adding that Whirlpool’s execution in 2016 is expected to be solid and there is a visible path towards “the company achieving its 2018 sales and EPS goals, both of which we believe are viewed with varying degrees of skepticism by investors.”

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Posted In: Analyst ColorLong IdeasUpgradesDowngradesAnalyst RatingsTrading IdeasJPMorganMichael Rehaut
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