WHR Beats Street On Earnings, Falls Short on Revenues, Hit in After Hours Trading

After rising some 18-percent over the past six weeks, Whirlpool Corporation’s stock is taking a hit in after hours trading on the New York Stock Exchange. The companies stock had dropped by more than 6.8-percent to $115.96 in the first 50-minutes after the market had closed on the day following the company’s 4th quarter earnings report released this evening.

According to stock analysts, the company’s earnings per share beat market expectations by 52-cents, however revenues for the quarter missed the market consensus by $100-million, leading to the tumble in after hour trading. During the regular trading day, the stock had been down only 0.49-percent.

Whirlpool Chairman & CEO Marc Bitzer says, “Sustained focus on our successful execution of price increases and disciplined working capital reduction, coupled with a favorable tax rate, allowed us to deliver very strong fourth-quarter earnings and cash which exceeded our most recent guidance.”

The Benton Harbor-based appliance giant announced today fourth-quarter GAAP net earnings of $170 million, or $2.64 per diluted share, compared to $(268) million, or $(3.74) per diluted share, reported for the same prior-year period. Fourth-quarter ongoing earnings per diluted share were $4.75, compared to $4.10 in the same prior-year period. The GAAP earnings missed Wall Street expectations by 62-cents, while the non-GAAP figure gave then the 52-cent surge beyond expectations.

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Fourth-quarter net sales were $5.7 billion, flat compared to the same prior-year period. Excluding the impact of currency, sales increased 2.5-percent. Bitzer says, “These results impressively demonstrate that we effectively manage through macroeconomic volatility, and provide additional confidence in our ability to drive positive results in 2019.”

Fourth-quarter earnings before interest and taxes (EBIT)(2) were $307 million, or 5.4-percent of sales, compared to $249 million, or 4.4-percent of sales, in the same prior-year period.

Fourth-quarter ongoing EBIT was $348 million, or 6.2-percent of sales, compared to $374 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 offset by higher costs, unfavorable productivity related to lower unit volumes and currency; prior-period results were positively impacted by the sale and monetization of approximately $30 million in certain tax credits in Latin America.

For the full year, net sales were $21.0 billion compared to $21.3 billion in 2017. Excluding the impact of currency, sales decreased 0.3-percent. GAAP net earnings and net earnings per share were $(183) million and $(2.72) in 2018 compared to $350 million and $4.70 in the prior year. Full-year EBIT was $171 million, or 0.8-percent of sales, compared to $1.0 billion, or 4.9-percent of sales, in the prior year. Full-year ongoing EBIT was $1.3 billion, or 6.3-percent of sales, compared to $1.4 billion, or 6.4-percent of sales, in the prior year. 2018 GAAP net earnings per diluted share were adversely impacted by non-cash items of $850 million and restructuring expense of $247 million. Non-cash items include asset impairment charges related to the EMEA region and the settlement with the French Competition Authority, which is expected to impact cash flow in 2019. Ongoing earnings per diluted share were $15.16, compared to $13.74 in the prior year, primarily driven by tax rate favorability and reduced share count.

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

For the twelve months ended December 31, 2018, the company reported cash provided by operating activities of $1.2 billion, compared to $1.3 billion in the prior year. The company reported free cash flow of $853 million for the full year 2018, compared to $707 million in the prior year, primarily driven by disciplined working capital management and the timing of certain payments.

FOURTH-QUARTER REGIONAL REVIEW

Whirlpool North America

Whirlpool North America reported fourth-quarter net sales of $3.1 billion, compared to $2.9 billion in the same prior-year period. Excluding the impact of currency, sales increased 5.4-percent.

The region reported fourth-quarter EBIT of $376 million, or 12.2-percent of sales, compared to $335 million, or 11.4-percent of sales, in the same prior-year period. Ongoing EBIT totaled $362 million, or 11.8-percent of sales, compared to $335 million, or 11.4-percent of sales, in the same prior-year period. During the quarter, the favorable impacts of product price/mix and fixed cost reduction were partially offset by raw material inflation, tariffs and higher freight costs.

Whirlpool Europe, Middle East and Africa

Whirlpool Europe, Middle East and Africa reported fourth-quarter net sales of $1.2 billion, compared to $1.4 billion in the same prior-year period. Excluding the impact of currency, sales decreased 6.3-percent.

The region reported fourth-quarter EBIT of $(15) million, or (1.2)-percent of sales, compared to $8 million, or 0.6-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 raw material inflation, unfavorable productivity due to unit volume declines and currency.

Whirlpool Latin America

Whirlpool Latin America reported fourth-quarter net sales of $990 million, compared to $1.1 billion in the same prior-year period. Excluding the impact of currency, sales increased 1.1-percent.

The region reported fourth-quarter EBIT of $45 million, or 4.5-percent of sales, compared to $70 million, or 6.5-percent of sales, in the same prior-year period. Ongoing EBIT totaled $59 million, or 5.9-percent of sales, compared to $70 million, or 6.5-percent of sales, in the same prior-year period. During the quarter, the favorable impacts of product price/mix and higher productivity were partially offset by raw material inflation and unfavorable currency; prior-period results were positively impacted by the sale and monetization of approximately $30 million in certain tax credits.

Whirlpool Asia

Whirlpool Asia reported fourth-quarter net sales of $372 million, compared to $358 million in the same prior-year period. Excluding the impact of currency, sales increased 11.2-percent.

The region reported fourth-quarter EBIT of $8 million, or 1.9-percent of sales, compared to $10 million, or 2.7-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 raw material inflation and increased bad debt provision.

OUTLOOK

For the full-year 2019, the Company expects GAAP earnings per diluted share of $12.75 to $13.75 and ongoing earnings per diluted share of $14.00 to $15.00 as favorable product price/mix, restructuring benefits and reduced share count are offset by a higher tax rate and cost and currency increases. On a GAAP basis, earnings per diluted share include restructuring expense of approximately $100 million.

For the full-year 2019, the Company expects to generate cash provided by operating activities of $1.4 billion to $1.5 billion and free cash flow of $800 million to $900 million.

Included in this guidance are restructuring cash outlays of approximately $100 million and, with respect to free cash flow, capital spending of approximately $625 million.

Whirlpool Chief Financial Officer Jim Peters says, “We remain committed to driving profitable growth through strong global price/mix and unwavering cost discipline, while also delivering sustainable working capital improvements,” and adds, “As a result, we expect to continue fully investing in our business to drive long-term margin expansion and strong cash generation.”