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Whirlpool (WHR) Navigates Challenging Macro Environment with Resilient Performance
Published on September 24, 2024 | Ticker: WHR

Whirlpool Corporation (NYSE: WHR), a leading global appliance manufacturer, has demonstrated its ability to navigate a challenging macroeconomic landscape while delivering solid financial results. The company reported annual net income of $481 million and annual revenue of $19.455 billion in its most recent fiscal year. Additionally, Whirlpool generated annual operating cash flow of $915 million and annual free cash flow of $366 million, showcasing its strong liquidity position.

Recent Developments

In the second quarter of 2024, Whirlpool reported net sales of $3,989 million, a 16.8% decrease compared to the same period in the prior year. This decline was primarily driven by the divestiture of the company's European major domestic appliance business. Excluding the impact of foreign currency, net sales decreased 16.0% year-over-year. The consolidated gross margin percentage for the quarter decreased to 15.7% from 17.0% in the same period of 2023, primarily due to volume and unfavorable product price/mix, partially offset by cost productivity.

Whirlpool's performance during the quarter was marked by strong sequential global margin expansion, with a 100-basis-point improvement in ongoing EBIT margin to 5.3%. This was driven by the company's pricing actions, cost takeout initiatives, and the continued strength of its international businesses.

Segment Performance

The company's MDA North America segment reported a 5.7% year-over-year decline in net sales, primarily due to unfavorable price/mix. However, the segment's EBIT margin improved sequentially by 70 basis points to 6.3%, as the company's pricing actions took effect. Whirlpool expects the net margin benefit from these price actions to be fully realized in the third quarter.

In the MDA Latin America segment, net sales increased 11.3% year-over-year, excluding the impact of foreign currency, driven by industry growth and continued market share gains in both Brazil and Mexico. The segment's EBIT margin was 5.8% for the quarter.

The MDA Asia segment delivered a strong performance, with net sales increasing 19.7% year-over-year, excluding the impact of foreign currency, driven by industry growth and market share gains. The segment's EBIT margin expanded to 6.2%, benefiting from cost actions and fixed cost leverage.

Whirlpool's SDA Global segment also performed well, with net sales increasing 11.3% year-over-year, excluding the impact of foreign currency, driven by new product launches and growth in the company's direct-to-consumer business. The segment's EBIT margin was 13.9%, supported by cost actions and volume growth.

Outlook

For the full year 2024, Whirlpool is reiterating its net sales guidance of $16.9 billion, which would represent a decline from the $19.5 billion reported in the prior year. The company is revising its ongoing EBIT margin guidance to 6%, down from the previous 6.8%, due to continued discretionary demand pressure from a soft housing market impacting full-year price/mix. However, Whirlpool expects to deliver $12 in ongoing earnings per share for the year, supported by its pricing and cost takeout actions.

Liquidity

The company's free cash flow guidance for 2024 has been refined to approximately $500 million, including the impact of restructuring cash outlays and capital expenditures of around $550 million. Whirlpool remains committed to its capital allocation priorities, including paying dividends of approximately $400 million and continuing its debt reduction initiatives.

Conclusion

Whirlpool's performance during the second quarter and its updated guidance for the full year 2024 demonstrate the company's ability to navigate a challenging macroeconomic environment. The company's focus on pricing actions, cost takeout initiatives, and the strength of its international and small domestic appliance businesses have enabled it to deliver sequential margin expansion and maintain its financial flexibility.

Looking ahead, Whirlpool remains confident in its long-term strategy and the favorable fundamentals of its business. The company is well-positioned to benefit from an eventual housing market recovery, with its strong presence in the builder channel and a robust pipeline of new product introductions. Additionally, the company's international and small domestic appliance segments continue to demonstrate growth potential, further diversifying Whirlpool's revenue streams.

Despite the near-term challenges, Whirlpool's disciplined execution, cost management, and strategic initiatives position the company to navigate the current environment and emerge stronger. Investors should closely monitor the company's progress in realizing the benefits of its pricing actions, cost takeout efforts, and the recovery in discretionary demand, as these factors will be key drivers of Whirlpool's future performance.

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