The leading manufacturer of home appliances worldwide, Whirlpool Corp. (WHR), has been recently upgraded by Fitch Ratings. Fitch raised the investment-grade credit ratings of Whirlpool to “BBB” from “BBB-,” based on the company’s improving financial performance, strong balance sheet and growing opportunities in the global appliances industry. Moreover, the ratings outlook stays “stable” for Whirlpool.
A “BBB” rating implies a low risk to default on financial commitments, unless badly affected by adverse business and economic conditions. Whirlpool’s balance sheet with $1.37 billion of cash and cash equivalents as of December 31, 2010, confirms this fact. Moreover, the company’s strong cash flow and lower debt levels have also facilitated the improved rating.
Whirlpool delivered strong financial results in the last quarter of 2010. Net profit almost doubled to $171 million or $2.19 per share from $95 million or $1.24 per share in the prior-year quarter. For full year 2010, net profit increased significantly to $7.97 per share from $4.34 in 2009. Sales for the fourth quarter were up 4% year over year to $5 billion, while sales for the full year rose 7% to $18.4 billion.
The company showed notable improvements in Latin America and Asia, despite higher material costs and unfavorable foreign currency fluctuations. Shipments to Latin America climbed 18% while those to Asia jumped 9%.
The emerging economies of Asia and Latin America, particularly China, India and Brazil, are expected to see strong demand for appliances in the near future. Whirlpool, being the market leader in the appliances business worldwide, is expected to capitalize on the growing opportunities in the emerging economies, which will further strengthen its market position.
Accordingly, Whirlpool improved its shipment guidance for each of these regions. The company expects a shipment growth of 5%–10% in Brazil and 6%–8% in Asia. However, the domestic appliances makers in these regions may provide tough competition to the company. Moreover, the economic hardships in the U.S. and European markets may pose considerable threats to its business in the upcoming quarters.
Thus, we maintain our Neutral recommendation on the stock over the long term. Currently, Whirlpool holds a Zacks #3 Rank, implying a short-term Hold rating.
WHIRLPOOL CORP (WHR): Free Stock Analysis Report
Zacks Investment Research
