Home appliances company, Whirlpool Corp. (WHR) provided upbeat outlook for the year 2012 on the strength of its current productivity programs, cost reduction measures to improve margins besides price hikes announced earlier. This has resulted in the stock moving up in the pre-market trading activities. But the concern on the company losing its share to Korean companies will continue to remain till Whirlpool regains its share.
The company reported 20 percent growth in net income driven by improved price/mix that had offset negative effect from currency and weak industry demand. The company also indicated that it expects flat to modest improvement in industry demand going forward.
Q4 Results
The Benton Harbor, Michigan-based Whirlpool reported net income of $205 million or $2.62 per share, up 20 percent from $171 million or $2.19 a share in the year-ago quarter. Excluding any items, the company's earnings would have been 32 cents a share, down 25.6 percent from 43 cents a share in the year earlier quarter.
Revenues slipped 2 percent to $4.9 billion from $5.0 billion in the previous year quarter. Street analysts had estimated the company to deliver earnings of $1.96 a share on revenues of $4.98 billion.
Gross margin improved to 14.5 percent from 12.4 percent in the third quarter and 13.2 percent in the year-ago quarter. Similarly, the cost spent on operation reduced to 8.6 percent of total sales from 8.8 percent in the previous year quarter.
Outlook
Moving ahead, Whirlpool guides GAAP earnings to be $5.00 - $5.50 a share for the year 2012. On an ongoing business operations basis, the company is looking for earnings of $6.50 - $7.00 a share for the same period. Street analysts are predicting the company to deliver earnings of $5.85 a share for the year 2012.
The company indicated that its North America unit is showing improvement in its operating profit and this will percolate for a stronger improvement in its operating results.
Our Take
Whirlpool's fourth quarter results did show improvement in its gross margin mainly because of price hike. Operational costs can still be reduced. The concern will continue to be there on Korean companies eating into Whirlpool's share. But the company's projection ahead of street expectations offers scope for appreciation of the stock.
