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Whirlpool: Creating a Niche in the Home Appliance Industry
Posted by: abirk (IP Logged)
Date: March 3, 2014 04:40PM
Life now-a-days have become very fast. Everybody is working, and is very busy. In this busy world, appliance companies play a pivotal role. They are inventing several home appliances to ease the life of people. Therefore, these appliances have become very popular, and the middle class in emerging markets is buying more and more appliances. The appliance industry is very competitive and volatile in nature. The main factor behind this is consumer sentiment. So, whenever people think to buy any home appliance, the only name that comes in mind is Whirlpool Corporation (WHR).
About this Appliance Giant
Founded in 1898, Whirlpool is one of the largest manufacturers of home appliances on the planet. Over the last 101 years, Whirlpool has emerged the leading manufacturer and supplier of major home appliances. With a market cap of $11.14 billion, this Benton Charter Township, Michigan based company operates in four segments: North America, Latin America, EMEA (Europe, Middle East and Africa) and Asia. Its brands include Whirlpool, Maytag, KitchenAid, Roper, Jenn-Air, Amana, Brastemp, Consul and Bauknecht. Its principal products are laundry appliances, refrigerators and freezers, cooking appliances, dishwashers, mixers and other portable household appliances. The company also produces hermetic compressors for refrigeration systems. Whirlpool is considered to be the largest home-appliances manufacturer in the world, ahead of Electrolux AB (ADR) (ELUXY), LG, Samsung (SSNLF), General Electric Co. (GE) and Haier Electronics Group Company Ltd. (HRELF).
Tracking the Performance
On Jan. 30, 2014, Whirlpool reported its fourth-quarter report where GAAP net earnings were $181 million, or $2.26 per diluted share, compared to net earnings of $122 million, or $1.52 per diluted share, reported for the same prior-year period. Adjusted diluted earnings per share improved to $2.97, compared to $2.29 in the prior year, and the reason for this is higher sales, ongoing cost productivity, and the benefit of cost and capacity-reduction initiatives.
Sales in the quarter were $5.1 billion (increased 6.2%) compared to $4.8 billion during the same prior-year period. The rise in sales is mainly due to increased demand for the company’s innovative products. Region-wise, North America and Latin America strongly contributed to total revenue. Fourth-quarter GAAP operating profit totaled $354 million, compared to $258 million in the same prior-year period. Adjusted operating profit totaled $386 million, 7.7% of sales, compared with $309 million, 6.5% of sales, in the same prior-year period.
A chart has been provided below to show the company’s full year results.
Whirlpool’s region performance is also provided below.
As of Dec. 31, 2013, Whirlpool had cash and cash equivalents of $1.38 billion, and long-term debt of $1.846 billion, compared to $1.168 billion and $1.944 billion, respectively, as of Dec. 31, 2012. The company generated a cash flow of $1.262 billion from operations in 2013. Meanwhile, the company spent $513.0 million toward capital expenditure during the year. Currently, Whirlpool has a negative free cash flow of $690.0 million.
Following a strong fiscal 2013, Whirlpool came up with a favorable guidance for 2014. For full-year 2014, Whirlpool expects GAAP diluted EPS in the range of $11.05 to $11.55. Other expectations include ongoing business operations EPS in the range of $12.00 to $12.50, and free cash flow of $700 million.
Regional expectations of the company are provided below.
Charts from company website
Recently, this appliance giant was once again named as one of Fortune Magazine's World's Most Admired Companies. The company was recognized for the fourth year in a row in the Home Equipment, Furnishings industry category. Whirlpool Corp has ranked No. 1 in its category for four consecutive years. The company got its highest scores in the field of innovation, social responsibility, people management, product quality and global competitiveness.
The company is spreading its wings in a digital economy; therefore, to get optimum results in this economy, Whirlpool has appointed Gerri Elliott to its board of directors. Elliott has exceptional knowledge in information technology. She has experience in global marketing, sales and service as well as a strategic understanding of transformative digital technologies.
Further, Whirlpool has initiated the use of a more environment friendly and energy efficient technology in U.S.-manufactured refrigerators and freezers. For this reason, the company partnered with Honeywell International Inc. (HON) to transform the currently used 245fa foam blowing agent technology at its U.S. manufacturing plants with the latter’s Solstice® Liquid Blowing Agent (LBA).
To Wrap Things Up
Whirlpool Corporation has one of the strongest brand portfolios in consumer appliances in the world. Whirlpool is also known for its shareholder-friendly moves. Since 1983, the company has increased its quarterly dividend from 22.5 cents to 62.5 cents. Recently, the company declared a quarterly dividend of 62.5 cents per share on the company's common stock. The dividend is payable March 15, 2014, to stockholders of record at the close of business on Feb. 28, 2014. This continuous dividend payment and increments reflect its ability to grow earnings, and show its impressive cash flow generation capabilities.
The next few years look good for Whirlpool because the company is well-positioned for positive global demand. It has continued growth and margin expansion followed by robust pipeline of new, innovative products. The company is also well equipped to generate cash, and has great investment capacity. I am therefore pretty bullish that this appliance giant is an interesting investment opportunity.
Stocks Discussed: WHR, ELUXY, SSNLF, GE, HRELF, HON,