Q4 Preview: Whirlpool's (WHR) Holiday Promotions Could Weigh On Margins

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WHR Hot Sheet

Rating Summary:
1 Buy, 1 Hold, 1 Sell

Rating Trend:

Up

Today's Overall Ratings:
Up: 16 | Down: 7 | New: 23

Shares of Whirlpool Corporation (NYSE: WHR) are trading down 0.32 percent Tuesday ahead of the release of its fourth-quarter results before the opening bell on Wednesday.

The Wall Street quarterly consensus for Whirlpool Corporation is $1.93 per share in earnings on $4.98 billion in sales. During the fourth quarter of last year, the company reported earnings of $2.11 per share on $5.04 billion in total sales.

For the full year 2011, analysts on the Street are currently estimating $9.24 per share in earnings on $18.74 billion in total sales.

The fourth quarter conference call is scheduled for 10:00 am ET.

According to data from Bloomberg, shares of Whirlpool Corporation have one Buy ratings, two Hold ratings and three Sell ratings. The average price target on shares of WHR is $50 with a range from $35 to $68.

Analyst Comments:

Goldman remains extremely bearish on the shares going into release as it reaffirms its Sell rating and $35 price target. The firm highlights margins may be substantially lower when compared to last year's as holiday sales promotions lasted significantly longer this year.

An analyst at Goldman comments, "We reiterate our Sell rating on Whirlpool as North American volumes and margins remain challenged following an aggressive Black Friday and cash flow gets more bleak. There have been a number of new positive and negative developments since our October downgrade, but the balance tilts towards the latter."

Although it doesn't anticipate any change in pricing dynamics, if at all, until final resolution in mid-2013, as a result of the second anti-dumping petition to the ITC, KeyBanc has reduced its expectations. For the fourth quarter and fiscal 2011, the firm now forecasts EPS of $0.42 and $2.21, down from its previous estimates of $0.76 and $2.54. KeyBanc highlights new tariffs could raise margins ahead (1% of margin = $1.70 in EPS).

A KeyBanc analyst reports, "The petition impacts 7 million units of the total 36 million AHAM 6 US shipments, on top of the roughly 2 million affected refrigerators in WHR's April 2011 petition. We estimate the total earnings upside of both petitions could be $2.66 (at 35% market share) to $3.80 (at 50% share) if a 15% tariff is put in place and raises industry pricing and EBIT."

KeyBanc is reiterating its Buy rating and $68 price target on the company going into the release.

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