Whirlpool Corporation (WHR) posted a profit of $141 million or $1.64 per share for the fourth quarter of 2009, beating the Zacks Consensus Estimate of $1.30 per share and year-ago level of $44 million or 60 cents per share. The company cited cost reduction and productivity initiatives as well as increased sales volume to be the contributing factors behind the earnings surprise.
Operating profit in the quarter totaled $199 million compared to $10 million in the prior-year quarter. Net sales totaled $4.9 billion, an improvement of 13% from the previous year. Excluding the impact of foreign exchange translation, the sales increased 5%.
In 2009, earnings were $4.34 per share compared to $5.50 per share in 2008. This nearly touched the Zacks Consensus Estimate of $4.46 per share. Net sales were $17.1 billion, a decrease of 10% from the year-ago level. Excluding the impact of foreign currency translation, sales declined 6% from the prior year.
Regional Performance
Sales in North America rose 4% to $2.6 billion, driven by an 8% increase in unit shipments. Unit shipments in the U.S. industry of major appliances increased 6% during the quarter. The region reported an operating profit of $136 million compared to a loss of $20 million in the previous year. The improvement was attributable to cost reduction, productivity initiatives and increased sales volume, partially offset by lower product price/mix. Whirlpool expects unit shipments in the U.S. industry to increase between 2%–4% in 2010.
Sales in Europe gained 2% to $956 million. Excluding currency effects, the sales declined 9%. Overall industry unit demand during the quarter decreased 8%. The region reported an operating profit of $19 million compared to $2 million in the previous-year period. Results were favorably impacted by lower costs and higher price/mix, partially offset by lower volume. The company expects industry unit shipments for 2010 to be close to the 2009 levels.
Sales in Latin America shot up 52% to $1.2 billion; excluding currency effects, the increase was 28%. The operating profit was $138 million compared to $110 million in the prior year. The improvement in profitability was attributable to higher sales volumes, higher productivity and favorable foreign currency fluctuations, partially offset by lower monetization levels of certain tax credits and lower price/mix. The company anticipates appliance shipments in Brazil to go up 5%–10%.
Sales in Asia advanced 34% to $188 million; excluding currency effects, the increase was 27%. The operating profit increased $3 million to $6 million from the prior year. The increase was attributable to higher unit volume, partially offset by lower price/mix. The company anticipates industry unit shipments in Asia to increase by 3%–5% in 2010.
Financial Position
Whirlpool had cash and cash equivalents of $1.4 billion as of December 31 2009 compared to $146 million as of December 31, 2008. The company generated free cash flow of $1.1 billion in 2009 compared to an outflow of $100 million in 2008. Working capital, particularly due to reduced inventory balances, was a significant source of cash flow during the year. The company expects to generate free cash flow of $400 million–$500 million in the year.
In 2009, Whirlpool had a net cash flow of $1.55 billion from operating activities compared to $327 million in 2008. Meanwhile, capital expenditures totaled $541 million during the same period.
Long-term debt amounted to $2.9 billion as of December 31, 2009. The long-term debt-to-capitalization ratio stood at 44%.
Estimate Revisions Trend
For 2010, Whirlpool expects earnings per share in the range of $6.50–$7.00 per share. This is a tad higher than the Zacks Consensus Estimate of $6.36 per share.
Over the last 30 days, out of the 7 analysts covering the stock, one has revised upward the estimate for full year 2010. Therefore, in the absence of any downward revision of estimate, our long-term recommendation on the stock remains “Outperform.”
With respect to earnings surprises, the stock has performed consistently well over the trailing four quarters, barring the fourth quarter of 2008. The average earnings surprise was as high as 226.49%. This implies that Whirlpool has beaten the Zacks Consensus Estimate by 226.49% over the last four quarters.
The current Zacks Consensus Estimates for the first quarter and full-year 2010 are profits of $1.21 and $6.36, respectively. The upside potential of these estimates, essentially a proxy for future earnings surprises, currently stands at 2.48% and 1.10%, respectively.
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