Whirlpool Corporation WHR shares have surged 8.8% in a month, outperforming the broader Zacks Household Appliances sector’s return of 5.6% and the Zacks Consumer Discretionary industry’s rise of 6.2%.

Image Source: Zacks Investment Research

This strong performance continued after the company released its third-quarter 2024 earnings, with its stock rising an additional 13%. Investor confidence in Whirlpool is evident, driven by the company's solid performance.

During the quarter, Whirlpool benefited from sequential margin expansion globally and cost takeout actions that helped offset challenges from an unfavorable price/mix. The company’s reaffirmation of its full-year guidance further bolstered investor sentiment, signaling confidence in its ability to meet expectations despite market headwinds.

Moreover, Whirlpool’s stock is above the critical technical thresholds, including its 50-day and 200-day moving averages. This moving average is an important indicator for gauging market trends and momentum. The breach of this threshold heightens investor concerns about the stock’s short-term outlook.

Factors Driving WHR’s Performance

Whirlpool is making significant progress in protecting its margins and enhancing productivity through its cost-takeout initiatives, especially in response to ongoing inflationary pressures. The company has completed its organizational simplification, as a part of its broader cost-takeout strategy. This includes reducing structural and discretionary costs, capitalizing on raw material deflation, managing working capital efficiently and aligning supply-chain and labor levels with demand.
Such actions delivered 25 basis points (bps) of sequential margin expansion and 50 bps year over year, led by the implementation of the organizational simplification. Sequentially, price/mix aided 75 bps margin expansion driven by the pricing actions in North America. These measures reflect Whirlpool’s effective approach to maintaining profitability amid a challenging housing market.

Whirlpool has shifted its focus to expanding margins in North America in response to the highly promotional environment in the United States in the second half of 2024. The North America segment delivered an impressive 7.3% EBIT margin for the quarter, demonstrating strong performance with a margin expansion of approximately 170 basis points since the first quarter.
Product innovation is crucial for future growth and margin expansion. In MDA North America, Whirlpool launched two new products in its laundry category, including an advanced front-load laundry pair with the Fresh Flow Vent System and the innovative Pet Pro Filter in front-load washers. Additionally, KitchenAid introduced its first four-door refrigerator. These innovations highlight Whirlpool’s commitment to driving growth through new, differentiated products.

WHR Faces Some Concerns in the Near Term

Management expects a tough macro backdrop in the United States, at least in the near term. Despite the recent interest rate cut, the U.S. housing market is witnessing higher mortgage rates. Consequently, demand in the United States has shifted heavily toward low-margin replacement, led by purchases, and the high-margin discretionary demand that remains weak on sluggish home sales. However, the housing market is poised for an eventual rebound.

Reflecting the negative sentiment around Whirlpool, the Zacks Consensus Estimate for 2024 has seen a downward revision. The consensus estimate for earnings for 2024 and 2025 implies a decline of 24.1% and 5.3%, respectively.

Final Words on Whirlpool

Whirlpool has demonstrated solid performance, with its recent third-quarter earnings release driving a strong surge in stock price. The company’s strategic cost-takeout measures, focus on margin expansion in North America and commitment to product innovation are positioning it well for resilience amid economic headwinds. However, challenges in the U.S. housing market and reduced consumer discretionary spending pose near-term risks. Investors with a long-term horizon may stay invested in this Zacks Rank #3 (Hold) stock.

Other Key Picks

Some better-ranked stocks from the Consumer Discretionary sector are Traeger, Inc. COOK, Unicharm Corporation UNICY and Snap-on Incorporated SNA.

Traeger, the creator and category leader of wood pellet grills, carries a Zacks Rank #2 (Buy) at present. COOK has a trailing four-quarter negative surprise of 41.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Traeger’s current financial-year earnings indicates the growth of 127.3% from the year-ago corresponding figure.

Unicharm Corporation is a manufacturer and seller of baby and child care, feminine care, healthcare, cosmetics, household and pet care products. It carries a Zacks Rank of 2. UNICY has a trailing four-quarter negative surprise of 6.4%, on average.

The Zacks Consensus Estimate for Unicharm’s current financial-year sales indicates a decline of 1.9% from the year-ago reported figures.

Snap-on, a global provider of professional tools, equipment and related solutions for technicians, vehicle service centers, original equipment manufacturers and other industrial users, currently carries a Zacks Rank #2. SNA has a trailing four-quarter earnings surprise of 1.6%, on average.

The Zacks Consensus Estimate for Snap-on’s current financial year’s earnings indicates growth of 3%, from the year-ago period's reported numbers.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Snap-On Incorporated (SNA) : Free Stock Analysis Report

Whirlpool Corporation (WHR) : Free Stock Analysis Report

Unicharm (UNICY) : Free Stock Analysis Report

Traeger, Inc. (COOK) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research