Analyst Gives Warning On Whirlpool Following AHAM Data

Recent weakness in appliance shipment data is becoming a headwind for Whirlpool Corporation (NYSE: WHR). The Analyst Buckingham Research analyst Megan McGrath maintains a Neutral rating with a $150 price target.

Benzinga · 11/20/2019 17:59

Recent weakness in appliance shipment data is becoming a headwind for Whirlpool Corporation (NYSE: WHR).

The Analyst

Buckingham Research analyst Megan McGrath maintains a Neutral rating with a $150 price target.

The Thesis

The Association of Home Appliance Manufacturers (AHAM) released data on Monday, showing a 12% year-over-year declines in AHAM 6 shipments, said McGrath, likely weighing on Whirlpool’s results.

“Although we believe that some of this weakness was likely due to end-of-quarter inventory reductions at retailers, we see it as adding an element of risk to our North America estimates if demand doesn’t recover as expected in November and December,” said the analyst.

In the analysts view, this month’s data raises the stakes for the November and December results, especially as promotional activity around Black Friday has begun. McGrath says it will be important to watch how long and how deep promotions are over the next few months.

Whirlpool’s North American unit sales have been trending slightly lower than expectations, added McGrath, with unit sales down 5% for the first 3 quarters of the year.

“Despite these lower unit sales, Whirlpool has achieved positive price/cost in North America and margins are expected to be up for the year. Looking forward, though, we are concerned that margin appreciation will be more difficult, especially if volumes remain low,” said the analyst.

Buckingham says improvements in EMEA profitability is the key to its 2020 earnings growth forecast for Whirlpool, with the regions EBIT growth currently responsible for 60% of the EBIT growth the firm is forecasting in 2020.

“With this segment not yet reporting a profitable quarter since 4Q17 we need more confidence in the profitability trajectory of this segment before becoming more constructive on the name.”

Price Action

Whirlpool shares are up 0.86% trading at $142.25.

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