Please ensure Javascript is enabled for purposes of website accessibility

Why Whirlpool Corporation Stock Sank Today

By Jeremy Bowman – Updated Oct 24, 2017 at 1:14PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A number of factors drove the appliance maker's shares lower.

What happened

Shares of Whirlpool Corporation (WHR 0.38%) were going down the drain this morning as the appliance manufacturer lowered its earnings guidance, and Sears Holdings (SHLDQ) said it would no longer carry the company's products after a pricing dispute.

As of 11:49 a.m. EDT, the stock was down 10.2%. The drop also came as the dishwasher maker missed estimates in its third-quarter earnings report last night.

A kitchen featuring Whirlpool appliances

Image source: Whirlpool.

So what 

Overall revenue increased 3% to $5.42 billion, which was short of expectations at $5.5 billion, while continuing operating profit fell 10% to $376 million. On the bottom line, adjusted earnings per share (EPS) improved from $3.66 to $3.83 with the help of a tax benefit, below the consensus at $3.93. 

CEO Marc Bitzer said, "We are pleased with our revenue growth, and free cash flow improvement but are not satisfied with our operating margins, which were impacted by raw material inflation, unfavorable price/mix and slow progress on our European integration."

The divorce with Sears came after the two companies had partnered for a century, and means Sears will no longer sell Whirlpool brands including Maytag, KitchenAid, and Jenn-Air after it depletes its current inventory. In a memo, Sears said, "Whirlpool has sought to use its dominant position in the marketplace to make demands that would have prohibited us from offering Whirlpool products to our members at a reasonable price." 

Now what 

Looking ahead, Whirlpool slashed its full-year earnings-per-share guidance from $13.60-$13.90 to $11.10-$11.40, due to elevated raw material prices, which the company sees increasing through 2018 as well. Management also announced a cost-cutting initiative to reduce overhead costs by $150 million in addition to ongoing productivity efforts. It was the third quarter in a row that management cut guidance. However, the company maintained its 2020 goals, which included EBIT margin of at least 10% and annual EPS growth of 10 to 15% by next year. 

Shares deserve to fall on the earnings report, guidance cut, and Sears split, but if raw materials are the biggest headwind, the stock should eventually bounce back.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Nearly 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Whirlpool Stock Quote
$146.53 (0.38%) $0.55
Sears Holdings Stock Quote
Sears Holdings

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.