Welbilt (WBT) Reports In-Line Q4 EPS, Revenues Beat; Offers FY19 EPS Guidance Below Consensus

Welbilt (NYSE: WBT) reported Q4 EPS of $0.18, in-line with the analyst estimate of $0.18. Revenue for the quarter came in at $406.1 million versus the consensus estimate of $393.71 million.

• Net sales were $406.1 million, an increase of 11.0 percent from prior year; Organic Net Sales increased 6.0 percent
• Net earnings were $24.3 million, a decrease of 63.7 percent; Adjusted Net Earnings were $25.4 million, a decrease of 33.2 percent
• Diluted net earnings per share were $0.17, a decrease of 63.8 percent; Adjusted Diluted Net Earnings Per Share were $0.18, a decrease of 30.8 percent
• Earnings from operations were $51.9 million, a decrease of 13.8 percent; as a percent of net sales, earnings from operations were 12.8 percent, a decrease of 370 basis points
• Adjusted Operating EBITDA was $72.7 million, a decrease of 3.2 percent; Adjusted Operating EBITDA margin was 17.9 percent, a decrease of 260 basis points and was negatively impacted by 30 basis points from the Crem® acquisition
• Net cash used in operating activities was $68.5 million, an improvement of 10.1 percent; Free Cash Flow was $80.3 million, an increase of 36.3 percent.

"We are pleased to deliver another quarter of strong Organic Net Sales growth,” said Bill Johnson, Welbilt’s President and CEO. "Both EMEA and APAC delivered double-digit Organic Net Sales increases. In the EMEA segment, Organic Net Sales increased across multiple product lines including Convotherm®, Merrychef®, Garland®, Frymaster® and Multiplex®. In the APAC segment, Organic Net Sales increased from strong sales to large chains and from higher Fabristeel project sales. In the Americas segment, Organic Net Sales grew slightly as pricing realization in the general market offset tough comparable sales from large chains and KitchenCare® in last year\'s fourth quarter."

“Operationally, Adjusted Operating EBITDA continued to benefit from solid execution of our Simplification and Right-Sizing initiatives, higher volume, improved net pricing and the acquisition of Crem International. Our Adjusted Operating EBITDA margin decreased as these benefits were offset by higher incentive compensation costs, unfavorable product mix compared to last year and higher material cost inflation related to recently-enacted tariffs and from suppliers passing higher input costs to us. While Crem had a positive impact to Adjusted Operating EBITDA dollars, it was dilutive to our margin."

"Our Free Cash Flow improved over prior year, primarily from accounts payable and inventory. As a percentage of net earnings, Free Cash Flow was 330.5 percent in the fourth quarter and 141.1 percent for the year, once again demonstrating our ability to generate superior Free Cash Flow to delever our balance sheet and fund growth investments."

"Welbilt enters 2019 with top-line momentum following four consecutive quarters of solid organic growth and with a renewed focus on profitable growth. Our Organic Net Sales guidance range of 2.0 to 5.0 percent growth includes growth in all three segments. In the Americas, we expect sales to general market customers will grow due to slightly improved market conditions, share gains and higher price realization. We also expect KitchenCare aftermarket sales to improve in 2019. These increases are expected to offset lower large chain sales following 2018\'s rollouts. In EMEA, we expect to benefit from increased sales to general market customers. In APAC, we are forecasting higher sales to general market customers, along with increased KitchenCare and Fabristeel sales."

"Our 2019 Adjusted Operating EBITDA margin guidance range is between 18.5 and 19.5 percent. We expect net pricing to offset the impact of tariffs and material cost inflation. We are planning to add engineering resources into our plants to focus on implementing Lean processes, product cost takeouts and 80/20 product line simplification. In addition, we are undertaking an operational review of our Simplification and Right-Sizing initiatives to validate our long-term growth and margin targets and fine-tune our execution plans. We are planning to hold an Investor Day at our headquarters on May 14 to share the results of the review," concluded Johnson.

GUIDANCE:

Welbilt sees FY2019 EPS of $0.71-$0.81, versus the consensus of $0.89.

• Net sales growth: between 3.0 and 6.0 percent (organic +2.0 to +5.0 percent, acquisition +1.0 percent, foreign currency translation +0.0 percent)
• Adjusted Operating EBITDA margin: between 18.5 and 19.5 percent
• Adjusted Diluted Net Earnings Per Share: between $0.71 and $0.81 per share; based on 141.8 million fully diluted shares outstanding; the effective tax rate for 2019 is forecasted to be between 28 and 30 percent; interest expense is expected to be between $92.0 and $97.0 million

For earnings history and earnings-related data on Welbilt (WBT) click here.

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