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Shares of Whirlpool Corporation (NYSE: WHR) headed down the drain last month, after the appliance giant reported a disappointing third-quarter earnings report and said it would stop supplying Sears Holdings (NASDAQ: SHLD), ending a partnership that had lasted a century. According to data from S&P Global Market Intelligence, Whirlpool stock finished the month down 11%.
As the chart below shows, the stock plunged on Oct. 24 as the company reported earnings and news broke about the divorce from Sears:
In its earnings report, Whirlpool said currency-neutral revenue edged up 2% to $5.42 billion, missing estimates at $5.48 billion, as EMEA (Europe, Middle East, and Africa) was a weak spot with currency-neutral revenues down 8%. Earnings per share, meanwhile, increased from $3.66 to $3.83, which was also short of expectations of $3.94.
CEO Marc Bitzer said that raw material inflation had eaten into operating margins, and the company was launching initiatives such as cost-based price increases and fixed-cost reductions.
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Separately, Bitzer talked about Whirlpool, which also owns brands like Maytag and KitchenAid, no longer supplying Sears, which was for years the country's biggest appliance seller, due to a pricing dispute. The retailer could have been affected by Whirlpool's cost-based price increases. Bitzer said Sears made up just 3% of Whirlpool's revenue, so the parting wouldn't have a big impact.
Management lowered its free cash flow guidance for the year from $1 billion to $900 million, and called for earnings per share of $13.60 to $13.90, down from a range of $14.50 to $15.00. However, CFO Jim Peters said, "We reaffirm our 2020 goals and are confident that our existing and newly announced actions will put us firmly back on track to deliver our commitments."
With its brand power and history, Whirlpool should be able to overcome these temporary challenges. I wouldn't adjust my investing thesis based on last month's report alone.
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