5 Reasons Why Credit Suisse Turned Bullish On Whirlpool

Whirpool Corporation WHR shares aren't far removed from its 52-week low of $143.11, but Credit Suisse said investors have multiple reasons to be bullish on the stock. 

The Analyst

Credit Suisse's Susan Maklari upgraded Whirpool from Neutral to Outperform with a price target lifted from $170 to $195.

The Thesis

• The bullish case for Whirpool's stock is based on the following, Maklari said in a Monday note: 
• Firsthand checks of prices on appliances after Memorial Day show an average 5-percent increase compared to the start of 2018, with washers and dryers accounting for the biggest gains, the analyst said. Encouragingly, industry sell-through remains unchanged, as big box retailers are noting double-digit sales comps in the appliance categories, she said. 
• Raw materials account for around 60 percent of cost of goods sold, which implies input costs are "key to results for Whirlpool, Maklari said. While some commodity prices are up, including flat steel, Whirlpool hedges most of its annual steel needs — which implies rising inflation is "not insurmountable," the analyst said. 
• Whirlpool's international turnaround is showing signs of progress, including a renegotiation of retail contracts in Europe and expectations for demand in Europe, Middle East and Africa to recover in the back half of 2018 and strengthen in Brazil, Maklari said. The company hasn't seen any impact to its China business amid recent trade announcements and threats of trade wars, she said. 
• Whirlpool is expected to maintain its 2018 guidance in its second-quarter report, including EBIT margin expansion of 50 basis points in North America to 12 percent, Maklari said. 
• Whirlpool's forecast of $1-$1.1 billion in free cash flow in 2018 marks a 50-percent improvement at the midpoint; this should be sufficient to support internal investments and capital return to shareholders, according to Credit Suisse. 

Price Action

Whirlpool shares were trading higher by more than 3 percent at the time of publication Monday. 

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