Please ensure Javascript is enabled for purposes of website accessibility

Why Whirlpool Stock Just Crashed

By Rich Smith - Updated Jan 28, 2021 at 1:36PM

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

Earnings beat, and investors sold. Wait. What?

What happened

Shares of industrial giant Whirlpool (WHR 1.06%) are tumbling in early afternoon trading Thursday, down 9.5% as of 12:55 p.m. EST.

Heading into Q4, analysts had forecast that Whirlpool would earn $6.07 per share in pro forma profit on quarterly sales of $5.6 billion. In fact, Whirlpool ended up earning $6.64 per share, though, and on sales of $5.8 billion. So this is a curious reaction investors are having to news that Whirlpool just beat on both sales and earnings -- but it is what it is.  

Cartoon characters confused by stock chart arrow falling and crashing into floor

Image source: Getty Images.

So what

And it gets even more curious the further you read into the earnings report.  

Whirlpool reports that Q4 was "very strong" for the home appliances manufacturer, showing 7.7% sales growth over Q4 2019, a net profit margin up 340 basis points at 8.6%, and "strong consumer demand" driving all of the above.

For the full year, earnings were "solid," and well ahead of both estimates and Whirlpool's own guidance, at $17.07 per share in earnings when calculated according to generally accepted accounting principles (GAAP). Free cash flow grew by leaps and bounds, too -- $1.2 billion in cash profits generated, a 36.6% increase year over year.

Now what

Topping off all that, Whirlpool informed investors that it anticipates growing its GAAP earnings in 2021 by a further 4% to 10%, to anywhere from $17.80 to $18.80 for the year, on sales of perhaps $20.6 billion.

For purposes of comparison, the company noted that its "adjusted" earnings per share (that's pro forma) will range from $19 to $20. At the midpoint of that range, Whirlpool looks set to easily surpass the $19.10 pro forma profit that Wall Street is projecting for it -- thus "beating" on earnings for a second year in a row. The company's sales guidance similarly leapfrogs Wall Street's projection for $20.1 billion in fiscal 2021 sales.

Now, how investors come away from all of this with the conclusion that Whirlpool stock should go down 10% today is beyond me. At 11.2 times trailing earnings, with a growth rate of as much as 10% and a very respectable 2.3% dividend yield, Whirlpool stock looks better than fairly priced to me.

Invest Smarter with The Motley Fool

Join Over 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 Corporation Stock Quote
Whirlpool Corporation
WHR
$180.85 (1.06%) $1.89

*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 service.

Stock Advisor Returns
344%
 
S&P 500 Returns
120%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

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.