Rising material costs and maturation of the established markets remain the primary headwinds for the company.
The prices of metals and plastics have shot up significantly, thereby forcing Whirlpool and many of its peers to increase the prices of their products. Hence, demand for products in the already established markets is expected to fall.
Therefore, Whirlpool has strategically targeted the emerging economies of Asia and Latin America, particularly China, India and Brazil, as these regions possess huge growth opportunities. These countries are expected to witness strong demand for appliances in the near future.
The appliance maker is highly keen to capitalize on the growing opportunities in these regions to strengthen its business and at the same time to maintain its leadership position and improve its market share.
Whirlpool expects shipments to grow by 5% to 10% in Latin America and 6% to 8% in Asia compared with the guidance of 2% to 3% growth in the U.S. and a 2% to 4% growth in Europe.
Whirlpool reported a decline in profit to $2.11 per share in the first quarter of 2011 from $2.51 in the prior year quarter aided by a 4% increase in cost of goods. Sales for the quarter were up 3% year over year to $4.4 billion. The company also increased its quarterly dividend by 16.3% to 50 cents per share from 43 cents per share, to bolster shareholders’ confidence.
Whirlpool holds a Zacks #3 Rank (Hold rating) for the short term and we maintain a Neutral recommendation for the long term.