Even in the face of “global economic volatility,” Whirlpool Corporation today beat Wall Street estimates for quarterly earnings per share, while they fell short of analyst’s expectations for revenues in the third quarter.
Saying, “We have sustained momentum towards achieving our long-term financial goals despite global economic volatility,” Whirlpool Chairman & CEO Marc Bitzer says the company, “Remain(s) committed to our robust strategy for creating shareholder value.”
The Benton Harbor appliance giant revealed earnings for its third quarter that advanced from the same period last year, announcing third-quarter GAAP net earnings of $358 million, or 7.0-percent of sales, equivalent to $5.57 per diluted share, as compared to $210 million, or 3.9-percent of sales, and $3.22 per diluted share, reported for the same period a year ago. The GAAP figure beats Wall Street’s expectations by $1.84 per share.
On a GAAP basis, net earnings margin, or earnings as a percent of sales, was favorably impacted by a gain on the sale of the Embraco compressor business of approximately $511 million, partially offset by product warranty and liability expense of $119 million. GAAP net earnings margin and ongoing EBIT margin were favorably impacted by price/mix and focused cost discipline. Third-quarter ongoing earnings per diluted share were $3.97, compared to $4.55 in the same prior-year period. That number beat’s analysts projections by 7-to-8-cents per share. Whirlpool’s prior-year period GAAP and ongoing earnings per diluted share were favorably impacted by a lower effective tax rate, primarily related to pre-funding of its U.S. pension and other tax planning strategies.
Whirlpool’s North America region delivered strong EBIT margin expansion to 12.8-percent, an 80 basis point improvement driven by strong price/mix and focused cost discipline, while the Europe, Middle East and Africa (EMEA) region delivered significant year-over-year and sequential EBIT improvement driven by the execution of strategic actions to restore profitability.
Chairman & CEO Bitzer adds, “Our fundamentals remain strong, and we made solid progress against our stated priorities with near-break even performance in EMEA and strong results in North America.”
Third-quarter net sales were $5.1-billion, compared to $5.3 billion in the same prior-year period, a decrease of 4.4-percent. Revenues missed the mark projected by analysts by some $40-million.
Third-quarter interest and sundry income was $29 million, compared to $24 million expense in the prior year, primarily driven by currency related hedging gains which were offset by an unfavorable foreign currency impact in gross margin.
For the nine months ended September 30, 2019, the Company reported cash used in operating activities of $(566) million, compared to $(615) million in the prior year; the $49 million improvement was primarily driven by higher net earnings.
THIRD-QUARTER REGIONAL REVIEW
Whirlpool North America
Whirlpool North America reported third-quarter net sales of $3.0 billion, compared to $3.0 billion in the same prior-year period, an increase of 0.5-percent. Excluding the impact of currency, sales increased 0.6-percent.
The region reported third-quarter EBIT of $387 million, or 12.8-percent of sales, compared to EBIT of $343 million, or 11.5-percent of sales, in the same prior-year period. Third-quarter prior year ongoing EBIT was $360 million, or 12.0-percent. During the quarter, the favorable impact of product price/mix and cost productivity benefits were partially offset by lower unit volumes and continued cost inflation.
Whirlpool Europe, Middle East and Africa
Whirlpool Europe, Middle East and Africa reported third-quarter net sales of $1.1 billion, compared to $1.1 billion in the same prior-year period, a decrease of 3.8-percent. Excluding the impact of currency, sales decreased 0.4-percent.
The region reported third-quarter EBIT of $(18) million, or (1.7)-percent of sales, compared to $(39) million, or (3.4)-percent of sales, in the same prior-year period. Ongoing EBIT was $(4) million, or (0.4)-percent of sales, compared to $(39) million, or (3.4)-percent of sales, in the same prior-year period. During the quarter, EBIT and ongoing EBIT were both favorably impacted by cost reduction initiatives and lower raw material inflation.
Whirlpool Latin America
Whirlpool Latin America reported third-quarter net sales of $632 million, compared to $878 million in the same prior-year period, a decrease of 27.9-percent. Organic net sales (non-GAAP) increased by 4.1-percent.
The region reported third-quarter EBIT of $29 million, or 4.6-percent of sales, compared to EBIT of $49 million, or 5.6-percent of sales, in the same prior-year period. Third-quarter prior year ongoing EBIT was $61 million, or 7.0-percent. During the quarter, the favorable impact of product price/mix and lower raw material inflation was more than offset by unfavorable currency and lower unit volumes related to temporary trade inventory timing. The Latin America region’s third-quarter 2018 results include $21 million of EBIT related to the Embraco compressor business.
Whirlpool Asia
Whirlpool Asia reported third-quarter net sales of $358 million, compared to $339 million in the same prior-year period, an increase of 5.7-percent. Excluding the impact of currency, sales increased 7.1-percent.
The region reported third-quarter EBIT of $9 million, or 2.4-percent of sales, compared to $13 million, or 3.8-percent of sales, in the same prior-year period. During the quarter, the favorable impact of higher unit volumes, lower raw material inflation and cost takeout initiatives were more than offset by continued brand transition investments in China.
OUTLOOK
For the full-year 2019, Whirlpool decreased its GAAP earnings per diluted share guidance to $16.80 to $17.55, as additional product warranty and liability expense was partially offset by adjustments to the Embraco gain on sale calculation. The Company has reaffirmed its ongoing earnings per diluted share guidance of $14.75 to $15.50, and is trending towards the high end of the range.
For the full-year 2019, the Company continues to expect to generate cash provided by operating activities of approximately $1.4 billion and free cash flow of approximately $800 million. Included in GAAP cash flow and free cash flow guidance are restructuring cash outlays of approximately $200 million and, with respect to free cash flow, capital spending of approximately $625 million.
Jim Peters, Chief Financial Officer for Whirlpool says, “We once again demonstrated the fundamental strength of our global business as we execute on our strategic initiatives, leading to margin expansion and improved cash generation,” and notes, “Additionally, we strengthened our balance sheet and made significant progress towards our long-term debt leverage target with the repayment of our $1 billion term loan.”
