Whirlpool (WHR +1%) posted in-line Q2 results and lowered its FY24 adjusted EPS outlook. Despite numerous challenges, including inflation and interest rates, and structural changes like divesting its EMEA business, investors feared worse outcomes.
A struggling housing market, with existing homeowners hesitant to move and potential buyers priced out, combined with tightened budgets and expensive financing, has created numerous issues for WHR over recent quarters. These conditions have led to a promotional environment that WHR has been selective about. Last quarter, WHR introduced a 5% price hike to offset inflationary pressures and boost its top line.
- On a year-over-year basis, price hikes have not significantly lifted quarterly numbers. WHR posted adjusted EPS of $2.39 in Q2, a 43.2% drop, on $3.99 billion in revenue, a 16.8% decline. MDA North America, WHR's largest market, saw a 5.7% decrease in net sales and a 380 bp decline in EBIT margins.
- Sequentially, the pricing program showed some success. WHR posted a 70 bp increase in EBIT margins to 6.3%, and a 5.7% improvement in net sales in its MDA North America segment. This positive development gave investors confidence that WHR can still spur growth despite market challenges.
- Other segments also showed year-over-year and sequential improvements in net sales. MDA Latin America registered an 11.3% year-over-year increase, while MDA Asia bounced back to positive growth with a 19.7% year-over-year leap in Q2. Management noted continued market share gains in key countries in Latin America and Asia. SDA Global (WHR's small appliances segment) saw an 11.3% uptick in net sales.
- The pricing actions and exceptional international growth supported WHR's reiterated FY24 revenue outlook of $16.9 billion. However, macroeconomic headwinds led WHR to lower its FY24 adjusted EPS forecast to approximately $12.00, down from $13.00-15.00, and ongoing EBIT margins to 6.0% from 6.8%.
- WHR's cost reduction efforts, targeting $300-400 million in FY24, position it well to end the year on a high note, projecting EBIT margins of 7.5%. This could provide the momentum needed to reenergize growth in 2025.
WHR has faced significant challenges over the past few years due to its strong ties to the housing market. However, it stands to gain significantly once the housing market rebounds. While the timing of interest rate cuts remains uncertain, the bulk of WHR's headwinds may be behind it, especially after delivering sequential improvements in Q2.
