What happened

Shares of industrial giant Whirlpool (NYSE:WHR) 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.  

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.