You Can Still Clean Up With Whirlpool

| About: Whirlpool Corporation (WHR)

When I first recommended Whirlpool (NYSE:WHR) last December it was trading at just over $85. Shortly after that it moved up by almost 10%, after which it traded in a very narrow range until the recent sell-off, (closing Friday at $76.05). I still like this stock and I like it even more at this price. The current p/e ratio of 8.4 trailing 12-month earnings is the lowest in the last five years. There is a high short interest, which often means the stock is getting ready to bounce.

First-quarter results, which were released in late April, were virtually flat year-over-year. Net earnings came in at $169 million ($2.17 per share, fully diluted) compared with $164 million ($2.13 per share) for the same period last year. Adjusted diluted earnings were $2.11 per share compared with $2.51 in the prior year. Sales were $4.4 billion, up 3% from the $4.3 billion reported in the first quarter of 2010. Gross margins, while not improving, are at least stayed fairly stable. Because of the recent sell-off the stock is now yielding 2.6% on an annual dividend of $2 a share.

Commented CEO Jeff M. Fettig: "Our first-quarter results reflect our ongoing cost reduction efforts and continued innovation investments, which helped to mitigate significant material cost inflation. We recently announced a 16% dividend increase, reflective of the success of our brand value creation strategy and our strong financial position."

On the negative side, the company's debt/equity ratio has been increasing and input costs have risen over the past number of months. And let's face it: the market is extremely hard to call right now and the overall sentiment has been negative.

Whirlpool is a play on a slowly improving economic picture, which will hopefully lead to a recovery in housing and an increased demand for appliances. There are a lot of question marks in the scenario but at the current price, which is down 28% from $105.47 last year at this time, Whirlpool is worthy of a small bet now for a possible big return down the road.

If you own the stock now, continue to do so and consider adding to your position. If you don't, I'd take a half position now and wait until we see some evidence of which direction the markets are heading over the next few months.

Buy with a target of $85.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in WHR over the next 72 hours.

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