Whirlpool earnings rebound in Q4

Whirlpool Corp. released its 2018 fourth quarter earnings Monday, which showed better earnings compared to the same quarter in 2017.

BENTON HARBOR — It was good quarter and an underwhelming year for Whirlpool Corp., which released its 2018 fourth quarter net earnings Monday.

After posting a significant loss at the end of 2017, the home appliance maker announced fourth quarter net earnings of $170 million, or $2.64 per diluted share. This was in comparison to a loss of $268 million reported for 2017’s fourth quarter.

Fourth quarter ongoing earnings per diluted share were $4.75, compared to $4.10 in 2017. The results topped Wall Street expectations as the average estimate of four analysts surveyed by Zacks Investment Research was for earnings of $4.30 per share.

“Sustained focus on our successful execution of price increases and disciplined working capital reduction, coupled with a favorable tax rate, allowed us to deliver very strong fourth quarter earnings and cash, which exceeded our most recent guidance,” Whirlpool CEO and Chairman Marc Bitzer said in a news release. “These results impressively demonstrate that we effectively manage through macroeconomic volatility, and provide additional confidence in our ability to drive positive results in 2019.”

Fourth quarter net sales were $5.7 billion, which were flat compared to the fourth quarter in 2017. Excluding the impact of currency, the Benton Harbor company’s fourth quarter sales increased 2.5 percent from the previous quarter.

Fourth quarter earnings before interest and taxes (EBIT) were $307 million, or 5.4 percent of sales, compared to $249 million, or 4.4 percent of sales in 2017.

Fourth quarter ongoing EBIT was $348 million, or 6.2 percent of sales, compared to $374 million, or 6.6 percent of sales, in the same prior-year period.

Whirlpool’s shares began at $123.14 on the New York Stock Exchange, but closed Monday with a slight increase of $124.48. However, shares fell by nearly $10 per share an hour after Whirlpool’s earnings were made public, as earnings fell short of analyst projections.

On a GAAP (generally accepted accounting principles) and ongoing basis, EBIT margin was favorably impacted by product price/mix and restructuring benefits, which were offset by higher costs, unfavorable productivity related to lower unit volumes and currency; prior-period results were positively impacted by the sale and monetization of about $30 million in tax credits in Latin America.

For the full year, net sales were $21 billion compared to $21.3 billion in 2017. Excluding the impact of currency, sales decreased 0.3 percent.

GAAP net earnings produced a loss of $183 million and net earnings per share came in at a loss of $2.72 in 2018, compared to $350 million and $4.70 in the prior year period.

Full-year EBIT was $171 million, or 0.8 percent of sales, compared to $1 billion, or 4.9 percent of sales, in the prior year. Full-year ongoing EBIT was $1.3 billion, or 6.3 percent of sales, compared to $1.4 billion, or 6.4 percent of sales in 2017.

2018 GAAP net earnings per diluted share were adversely impacted by non-cash items of $850 million and restructuring expenses of $247 million.

Ongoing earnings per diluted share were $15.16, compared to $13.74 in the prior year, primarily driven by tax rate favorability and reduced share count.

For 2018, Whirlpool reported cash provided by operating activities of $1.2 billion, compared to $1.3 billion in 2017.

The appliance maker reported free cash flow of $853 million for the full year 2018, compared to $707 million in the prior year, which was driven by working capital management and the timing of certain payments.

Regional review

• Whirlpool North America reported fourth quarter net sales of $3.1 billion, compared to $2.9 billion in the same prior-year period. Excluding the impact of currency, sales increased 5.4 percent.

The region reported fourth quarter EBIT of $376 million, or 12.2 percent of sales, compared to $335 million, or 11.4 percent of sales in 2017. Ongoing EBIT totaled $362 million, or 11.8 percent of sales, compared to $335 million, or 11.4 percent of sales in 2017.

During the quarter, the favorable impacts of product price/mix and fixed cost reduction were partially offset by raw material inflation, tariffs and higher freight costs.

• Whirlpool Europe, Middle East and Africa reported fourth quarter net sales of $1.2 billion, compared to $1.4 billion in the same prior-year period. Excluding the impact of currency, sales decreased 6.3 percent.

The region reported fourth quarter EBIT of a loss of $15 million, or a drop in 1.2 percent of sales, compared to $8 million, or 0.6 percent of sales in 2017.

During the quarter, the favorable impacts of product price/mix and restructuring benefits were more than offset by raw material inflation, unfavorable productivity due to unit volume declines and currency.

• Whirlpool Latin America reported fourth quarter net sales of $990 million, compared to $1.1 billion in the same prior-year period. Excluding the impact of currency, sales increased 1.1 percent.

The region reported fourth quarter EBIT of $45 million, or 4.5 percent of sales, compared to $70 million, or 6.5 percent of sales in 2017. Ongoing EBIT totaled $59 million, or 5.9 percent of sales, compared to $70 million, or 6.5 percent of sales in the same prior-year period.

During the quarter, the favorable impacts of product price/mix and higher productivity were partially offset by raw material inflation and unfavorable currency; 2017 results were positively impacted by the sale and monetization of about $30 million in certain tax credits.

• Whirlpool Asia reported fourth quarter net sales of $372 million, compared to $358 million in 2017. Excluding the impact of currency, sales increased 11.2 percent.

The region reported fourth quarter EBIT of $8 million, or 1.9 percent of sales, compared to $10 million, or 2.7 percent of sales in 2017.

During the quarter, favorable impacts of product price/mix and restructuring benefits were more than offset by raw material inflation and increased bad debt provision.

2019 outlook

For the full-year 2019 guidance, Whirlpool announced it expects GAAP earnings per diluted share of $12.75 to $13.75 and ongoing earnings per diluted share of $14 to $15. This forecast anticipates favorable product price/mix, restructuring benefits and a reduced share count will be offset by a higher tax rate and cost and currency increases.

For the full-year outlook, Whirlpool stated it expects to generate cash by operating activities of $1.4 billion to $1.5 billion and free cash flow of $800 million to $900 million.

Included in this guidance are restructuring cash outlays of about $100 million and capital spending of about $625 million.

“We remain committed to driving profitable growth through strong global price/mix and unwavering cost discipline, while also delivering sustainable working capital improvements,” Jim Peters, chief financial officer of Whirlpool, said in the release. “As a result, we expect to continue fully investing in our business to drive long-term margin expansion and strong cash generation.”

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