Whirlpool (WHR, Financial) shares are plummeting today, even though the company surpassed Q1 earnings and revenue expectations and maintained its FY24 financial goals. The ongoing uncertainty in the housing market, a key factor for WHR's performance, is deterring investors, despite the company's positive Q1 outcomes and unchanged FY24 guidance. Additionally, recent job cuts have not helped boost investor confidence.
In its first quarter under a new reporting structure, Whirlpool has segmented its operations into Major Domestic Appliance (MDA) sales across North America, Europe, Latin America, and Asia, alongside Small Domestic Appliances (SDA) globally. This restructuring follows the divestiture of most of its EMEA business and the sale of a 24% stake in Whirlpool of India, leaving WHR with a 51% ownership. These strategic moves are expected to generate over $750 million in present value future cash flows in the current year and an incremental cash flow of $250-300 million in 2025, aligning with the company's long-term free cash flow objectives.
- Q1 saw weak volumes in the North American home appliance industry, leading to increased promotional activities. Despite these efforts, WHR's MDA North America sales fell by 8.1% year-over-year, with a significant 450 basis points (bps) contraction in EBIT margins to 5.6%.
- In Europe, challenges persisted with a 5.0% decline in net sales and a negative EBIT margin of (1.1)%, impacting WHR's overall EBIT margins by 1.2 points to 4.3%. However, WHR expects margin improvements following its divestiture in the region.
- Contrastingly, WHR experienced growth in Latin America, Asia, and the SDA Global segment, with notable increases in net sales and EBIT margins.
- Despite mixed regional performance, WHR outperformed Q1 expectations with an adjusted EPS of $1.78 and revenues of $4.49 billion, a 3.4% decrease year-over-year. The company also reaffirmed its FY24 guidance, projecting adjusted EPS of $13.00-15.00 and revenues of $16.9 billion.
Despite surpassing Q1 expectations, WHR's share price is declining to multi-year lows, reflecting investor concerns over near-term economic challenges. However, the company remains optimistic about its long-term prospects, citing a housing undersupply and a strong product pipeline. Today’s significant sell-off, bringing shares down to April 2020 levels and valuing the company at a 6.9x FY24 earnings multiple, may be seen as an overreaction by some market watchers.
