Whirlpool (NYSE:WHR) hasn't had an easy time of it for the past year, but the company has shown not only margin and EBIT improvements, but significantly beaten estimates as well. In fact, during 4Q19, the company beat estimates by $0.64/share in terms of EPS. Despite this, valuation hasn't reflected this improvement.
Let's see why that is.
Whirlpool - How has the company been doing?
Calling 4Q19 positive would, as I see it, be an understatement. The company blew certain numbers out of the park, and delivered on many of its promises.
- Margin expansion that's ongoing in terms of EBIT, up 100% to 7.2% for 4Q19.
- All regions profitable, with NA delivering EBIT margins of 13.3% for 4Q19.
- Positive EBIT actions in EMEA-region delivering positive results and on track.
- Excellent FCF due to improvements in company working capital as well as lower CapEx - positive FCF improvements in all regions. FCF is now 4.5% of net sales.
- Company debt is looking better. While in 2018, this was elevated to above 3.34X, it now stands at 1.9-2.2X in terms of net debt/EBITDA depending on your LTM/NTM perspective. In terms of debt/capitalization, Whirlpool now stands at 54%.
These improvements track in terms of FY19 results, with EPS improvements, margin expansions, and nearly a billion dollars worth of free cash flow. The company also executed on pricing actions to minimize tariff impacts, cost takeouts for SCM/VCM (Supply/Value chain management/optimization) and maintained a low CapEx and R&D funding level.
Dividends have been increased, and shares have been bought back, once again affirming Whirlpool as a very shareholder-friendly company and showing why I own 0.7% of my portfolio in it.
A couple of highlights to put some color to these results. North America first, which really delivered well in terms of profit.
(Source: 4Q19 Presentation)
