Moody's Raises Outlook on Whirlpool (WHR) to Positive

Moody's Investors Service revised Whirlpool Corporation's (NYSE: WHR) rating outlook to positive from stable reflecting its expectation that Whirlpool's operating performance, credit metrics and credit profile will continue to improve. Moody's affirmed all ratings, including the Baa2 senior unsecured rating and the Prime-2 commercial paper rating.

"We expect Whirlpool's operating performance to improve as it expands its international footprint," said Kevin Cassidy, Senior Credit Officer, at Moody's Investors Service. Pro forma credit metrics are temporarily weak due to two debt-funded acquisitions in October 2014, but Moody's expects improvement as the US economy and housing market recover, albeit at an uneven pace, and the company repays debt with free cash flow. Whirlpool will benefit from the continued release of pent-up demand by middle-income consumers, which Moody's thinks will accelerate when there is a broader recovery in the housing market.

Ratings affirmed:

Whirlpool Corporation

LT Issuer Rating at Baa2;

Senior Unsecured at Baa2;

Senior Unsecured Shelf at (P)Baa2;

Subordinated Shelf at (P)Baa3;

Commercial Paper at Prime-2;

Whirlpool Canada Inc.

Commercial Paper at Prime-2;

Whirlpool Finance B.V.

Commercial Paper at Prime-2

RATINGS RATIONALE

Whirlpool's Baa2 senior unsecured rating reflects its significant scale with revenue of approximately $23 billion (pro forma for recent acquisitions), considerable geographic diversification, strong brand names, and a good liquidity profile. Credit metrics are currently weak due to the acquisitions of Indesit and Hefei Sanyo in October 2014, but will return to acceptable levels within 12-18 months. Better than typical credit metrics are needed for a given rating category because of the cyclical nature of Whirlpool's business. Moody's expects credit metric improvement because of debt repayments with free cash flow. Higher earnings will be driven by modest growth in Europe, strong North America demand and Whirlpool's efficient cost structure. Moody's anticipates demand growth in North America, largely because of the continuing recovery in the US housing market, gradual economic expansion, improved discretionary consumer spending, and the replacement cycle for appliances from the mid-2000 housing boom. The ratings are constrained by the highly cyclical nature of the consumer appliance business, which can result in sharply lower earnings and cash flow during weak economic times.

The positive outlook reflects Moody's belief that Whirlpool will continue to reduce financial leverage and improve its overall credit metrics as appliance demand continues improving over the near to medium term.

An upgrade is possible if Whirlpool can improve and maintain its earnings, cash flow and credit metrics in the face of economic uncertainties. Specifically, an upgrade would require EBIT margins sustained above 8% and retained cash flow/net debt maintained around 40%.

While unlikely in the near term given the positive outlook, ratings could be downgraded if credit metrics don't improve as expected, global appliance demand significantly decreases or operating performance otherwise weakens. Key credit metrics that could result in a downgrade are EBIT margins maintained below 6% or retained cash flow/net debt sustained below 30%.

Subscribers can find further details in the Whirlpool Credit Opinion published on Moodys.com.

The principal methodology used in this rating was the Global Consumer Durables methodology published in September 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

You May Also Be Interested In

• Goldman Sachs on Meta Platforms Inc. (META): 'We expect investors to have an initial negative reaction'
• Ternium SA (TX) Tops Q1 EPS by 17c
• First Mid Bancshares, Inc. (FMBH) Tops Q1 EPS by 8c