The extension of the tax credit for energy-efficient appliances through 2012 is expected to bring considerable benefits to the appliance-makers such as Whirlpool Corp. (WHR) and General Electric Co. (GE). The tax credit, as declared by the Obama Administration, is projected to cost the government approximately $235 million, almost thrice the $78 million estimated cost through 2011.
The credit facility, introduced in 2005, was aimed at providing a fixed tax concession to companies that manufacture appliances with high efficiency standards. However, in its 2011 version, a capped credit limit of $25 million has been introduced for each of the appliance manufacturing companies. However, clothes washers and refrigerators that meet the highest efficiency standards will enjoy credit limits up to $225 and $200 per appliance, respectively.
Both Whirlpool and General Electric are pioneers in appliance making. They undertake constant and deliberate efforts for upgrading their products. Both are keen on manufacturing products that comply with the “highest energy efficiency” norms. As a result of these efforts, Whirlpool was awarded the 2011 ENERGY STAR Sustained Excellence award, the highest possible award provided by the U.S. Environmental Protection Agency (EPA).
Simultaneously, General Electric is engaged in a bunch of projects aimed at incorporating energy efficienct products in each of its business segments. Alongside, General Electric,NRG Energy Inc. (NRG) and ConocoPhillips (COP) have formed a conglomeration to augment the development of next-generation energy technology.
Whirlpool is expected to receive a tax credit of nearly $300 million in 2011, which will boost its earnings. Similarly, General Electric, whose benefit from the tax credit amounted to $200 million in 2010, is also believed to make considerable gain this year as well.
In 2010, Whirlpool’s net income increased substantially to $9.65 per share from $5.01 per share in 2009. Revenues increased 7% to $18.4 billion. Whirlpool expects a 5%–7% revenue growth in 2011 accompanied by a 10%–15% growth in earnings, incorporating the effects of tax credit that were introduced by the U.S. government in December, 2010.
On the other hand, General Electric earned a profit of $1.15 per share, up 15% from $1.00 per share in 2009. However, revenues dropped 3% to $150.2 billion. The company had a record $175 billion of backlog at the year-end, which is expected to boost its performance in the forthcoming quarters.
CONOCOPHILLIPS (COP): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
NRG ENERGY INC (NRG): Free Stock Analysis Report
WHIRLPOOL CORP (WHR): Free Stock Analysis Report
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