Whirlpool Scores Substantial Earnings Per Share Beat of Wall Street on 3Q Results

For the first time in a number or recent quarters Wall Street is liking the news out of Whirlpool Corporation and that is translating to an 8 to 9-percent boost in the share price in after hours trading this evening, all thanks to a solid performance against analysts expectations on earnings per share and a tiny miss on projected revenues.

The Benton Harbor-based appliance giant had been rising over the past several days but in the hours ahead of the earnings reports this evening that rise had faded with the stock down nearly $5.50 a share at the close, but their data was released shortly after the market had ended for the day and made an immediate turn around and a nearly 9-percent run up within the first couple of hours after the report.

In that report Whirlpool announced third-quarter GAAP net earnings of $210 million, or $3.22 per diluted share, compared to $276 million, or $3.72 per diluted share, reported for the same prior-year period. Third-quarter ongoing earnings per diluted share were $4.55, compared to $3.83 in the same prior-year period. Wall Street had anticipated that third-quarter EPS figure to settle in around the $3.76 per share range, giving the company a sizable upside beat of $0.79 per share against expectations. On the revenue front the company reported third-quarter net sales were $5.33 billion, compared to $5.4 billion in the same prior-year period. Analysts had been expecting revenues of $5.34 billion, so the miss was negligible in the long run. Excluding the impact of currency, sales increased 1.5-percent in the quarter.

Chief Executive Officer Marc Bitzer pegs the strength to, "Very impressive results in North America and a favorable tax rate, and adds that, "allowed us to deliver our highest quarterly ongoing EPS in our long history, demonstrating our ability to overcome the numerous external challenges we have been facing." Bitzer notes, "While our EMEA performance has been disappointing, our progress on restoring volume and the new actions to refocus and right-size our business give us confidence that we can turn around the region."

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Apparently Wall Street concurred this evening with strong after market up turn. Some of that strength undoubtedly comes from the company's guidance for full year earnings per share to land in the range of $14.50 to $14.80. That's up from their previous guidance of $14.20 to $14.80 and the street's consensus calling for $13.90 per share.

Third-quarter earnings before interest and taxes (EBIT) were $275 million, or 5.2-percent of sales, compared to $310 million, or 5.7-percent of sales, in the same prior-year period. Third-quarter ongoing EBIT was $332 million, or 6.2-percent of sales, compared to $355 million, or 6.6-percent of sales, in the same prior-year period. On a GAAP and ongoing basis, EBIT margin was favorably impacted by product price/mix and restructuring benefits, which were more than offset by raw material inflation, higher freight costs and lower unit volumes.

During the third quarter, the company made a voluntary contribution of approximately $350 million to lower its long-term pension funding obligation. That contribution, combined with additional tax planning, resulted in a lower effective tax rate for the quarter.

For the nine months ended September 30, 2018, Whirlpool reported cash used in operating activities of $(615) million, compared to $(33) million in the same prior-year period. The Company reported free cash flow of $(874) million for the first nine months of 2018, compared to $(348) million in the same prior-year period, primarily driven by a voluntary pension funding contribution and working capital timing in North America.

Here is the company's overarching data by region followed by its overall outlook:

THIRD-QUARTER REGIONAL REVIEW

Whirlpool North America

Whirlpool North America reported third-quarter net sales of $3.0 billion, compared to $2.9 billion in the same prior-year period. Excluding the impact of currency, sales increased 5.3-percent.

The region reported third-quarter EBIT of $343 million, or 11.5-percent of sales, compared to $336 million, or 11.8-percent of sales, in the same prior-year period. Ongoing EBIT totaled $360 million, or 12.0-percent of sales, compared to $336 million, or 11.8-percent of sales, in the same prior-year period. On a GAAP and ongoing basis, the favorable impact of product price/mix was partially offset by raw material inflation, tariffs and higher freight costs.

Whirlpool Europe, Middle East and Africa

Whirlpool Europe, Middle East and Africa reported third-quarter net sales of $1.1 billion, compared to $1.3 billion in the same prior-year period. Excluding the impact of currency, sales decreased in the region 7.6-percent.

The region reported third-quarter EBIT of $(39) million, or (3.4)-percent of sales, compared to $(2) million, or (0.2)-percent of sales, in the same prior-year period. During the quarter, the favorable impacts of product price/mix and restructuring benefits were more than offset by unfavorable productivity due to unit volume declines and raw material inflation.

Whirlpool Latin America

Whirlpool Latin America reported third-quarter net sales of $878 million, compared to $966 million in the same prior-year period. Excluding the impact of currency, sales increased 1.8-percent.

The region reported third-quarter EBIT of $49 million, or 5.6-percent of sales, compared to $55 million, or 5.7-percent of sales, in the same prior-year period. Ongoing EBIT totaled $61 million, or 7.0-percent of sales, compared to $55 million, or 5.7-percent of sales, in the same prior-year period. During the quarter, the favorable impacts of product price/mix and unit volume growth were partially offset by raw material inflation; prior-period results were positively impacted by the sale and monetization of certain tax credits.

Whirlpool Asia

Whirlpool Asia reported third-quarter net sales of $339 million, compared to $373 million in the same prior-year period. Excluding the impact of currency, sales decreased 4.3-percent.

The region reported third-quarter EBIT of $13 million, or 3.8-percent of sales, compared to $9 million, or 2.4-percent of sales, in the same prior-year period. During the quarter, the favorable impacts of product price/mix and fixed cost takeout were partially offset by raw material inflation and lower unit volumes.

OUTLOOK

For the full-year 2018, Whirlpool now expects GAAP earnings per diluted share of $(2.90) to $(2.60) and ongoing earnings per diluted share of $14.50 to $14.80 as favorable product price/mix, share repurchases and a favorable tax rate are expected to be partially offset by weaker than expected performance in the EMEA region. On a GAAP basis, restructuring expense of $250 million, non-cash items of $860 million and trade customer insolvency costs are expected to negatively impact results. In 2018, non-cash items include asset impairment charges related to the EMEA region and a preliminary settlement with the French Competition Authority, which is expected to impact cash in 2019.

For the full-year 2018, the Company now expects to generate cash from operating activities of approximately $1.2 billion and free cash flow of approximately $600 million. Included in this guidance are restructuring cash outlays of up to $300 million, voluntary pension contributions of approximately $350 million and, with respect to free cash flow, capital spending of approximately $625 million.

Whirlpool Chief Financial Officer Jim Peters says, "During the quarter, we pre-funded our long-term pension obligations, repurchased additional shares and significantly reduced our inventory." Peters adds, "Consistent with our balanced approach to capital allocation, we will continue to fully invest in our business to drive long-term margin expansion and sustained improvements in free cash conversion."

Whirlpool stock ended the trading day at $104.27 per share, down $5.45 or 4.97-percent on the day, but in after hours trading had climbed to $115.17 within 15 minutes of the market's close, before easing back to a little more than $112.00 per share two hours later headed into the eastern time zone dinner hour.