UPDATE: MKM Partners Downgrades Whirlpool Corporation (WHR) to Neutral on Concerns About Higher Steel Prices
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(Updated - October 17, 2016 10:41 AM EDT)
MKM Partners downgraded Whirlpool Corporation (NYSE: WHR) from Buy to Neutral with a price target of $176.00 (from $215.00). Analyst Megan McGrath sees headwinds from steel prices, which are up 17% year-over-year.
"We are lowering our 4Q16 and 2017 EPS estimates based primarily on the rise this year in steel prices. Although steel prices have pulled back meaningfully from the recent highs set in June, we think it would be unrealistic to assume that the higher y/y prices experienced during 2Q and 3Q this year won't have at least a short-term impact on WHR margins," said McGrath.
"WHR shares have pulled back 16% from their 2016 highs and are up roughly 10% ytd (vs. a 1.6% decline and 4.5% rise, respectively in the S&P 500). As a result, some of the higher steel prices may already be priced in (although we do not believe they are in consensus estimates yet). At 11x forward EPS, we do not view the shares as expensive, but no longer see them as a bargain given likely steel price and potential FX headwinds. If steel prices were to reverse course and/or we become confident in WHR's ability to more than offset the headwinds, we could potentially become constructive again on the shares," added the analyst.
Shares of Whirlpool Corporation closed at $160.75 yesterday.
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