It's always tempting to buy stocks on a dip. Coincidentally, two high-yielding stocks, Whirlpool (WHR 2.61%) and United Parcel Service (UPS +2.30%), both gave earnings reports on the same day recently, and both stocks declined by double-digit percentages on the day.
The two companies share some similarities, as they are both exposed to consumer spending and have seen negative effects from the ongoing tariff conflict. However, there are three key reasons why one stock is more attractive than the other.
What happened to UPS and Whirlpool
Both companies missed earnings estimates in the third quarter. Whirlpool lowered its full-year guidance, but UPS declined to give full-year guidance on the grounds of a heightened degree of uncertainty created by the tariff environment and its effect on its customers, notably small and medium-sized businesses (SMBs).
NYSE: WHR
Key Data Points
Whirlpool has two main issues. First, the potential escalation in the tariff conflict caused Asian competitors to, once again, pre-load products into the market while the tariff delays were in place and engage in intensive promotional activity. That's damaging Whirlpool's near-term competitive position.
Second, ongoing relatively high interest rates continue to negatively affect the housing market, which in turn hurts demand in its higher-margin discretionary appliances market. Consequently, management cut its full-year ongoing earnings per share guidance from $10 to $6 to $8, and its free cash flow (FCF) guidance to $400 million (from $500 million to $600 million previously).
UPS met its guidance for revenue of $21 billion in the quarter, but missed its adjusted operating margin guidance of 9.3% in reporting an adjusted operating margin of 8.8%. Its three main problems are the effect of tariffs on trade flows in general, the specific effect on the China-to-U.S. trade route (UPS' most profitable trade lane, according to CEO Carol Tome) , and the inordinate effect the tariffs have on SMBs as they struggle to adjust to the changing environment.
Although many of the problems are the same, the solutions differ, and I believe Whirlpool's stock is better positioned to recover than UPS'. There are three key reasons for this.
NYSE: UPS
Key Data Points
Whirlpool will ultimately be a beneficiary of the new tariff regime
It's far from clear how the dust will settle on the tariff regime, so it's very challenging to forecast where the trade flows that impact UPS volumes will be in the future. Indeed, that's primarily where management declined to update guidance.
However, one thing we can predict with a high degree of certainty is that the Trump administration wants to support U.S. companies and U.S. manufacturing, and that's highly likely to be good news for Whirlpool. Management has long argued it will ultimately be a winner from Trump's tariffs. It even included a slide on its earnings presentation noting total tariff effects of up to 61% U.S. appliance imports from China, 29% for Korea-made appliances, and 25% for Vietnam-made appliances.
The effect of these tariffs, when applied, will hit appliance companies manufacturing in these countries. That's why they pre-loaded products into the market and are now selling down inventory.
A rate cut will help Whirlpool more than UPS
UPS' main problem is the tariffs. On the other hand, one of Whirlpool's problems could be alleviated with an interest rate cut that could help reduce mortgage rates and, ultimately, existing home sales. That would be good news for its higher-margin, significant domestic appliance sales. With the market believing a rate cut in September is a possibility, Whirlpool could see some more favorable trading conditions by the end of the year.
Image source: Getty Images.
Whirlpool's management seems ahead of the curve
Whirlpool's management made the decision to cut its dividend (saving about $190 million in cash), and it successfully refinanced $1.2 billion worth of load debt at a weight average yield of 6.3%. It also plans to raise up to $600 million from its sale of a stake in Whirlpool India this year and generate $400 million in FCF, all of which can contribute to reduce its current net debt of $6.56 billion by $700 million in 2025.
In contrast, UPS already spent $1 billion on share buybacks in 2025 (its share price is now at a 2025 low). It recommitted to using $5.5 billion in cash by maintaining its dividend, and almost certainly will miss its initial FCF guidance of $5.7 billion. Tome's commentary on the earnings call, "We know how important the dividend is to our investors, and you have our commitment to a stable and growing dividend," is fine, and many investors will appreciate it.
Image source: Getty Images.
However, it's questionable whether maintaining a dividend which is unlikely to be covered by FCF this year, while trading conditions are so uncertain that management can't give guidance, is the best use of resources. Moreover, UPS may need to invest in other areas by way of adjusting to any kind of structural changes in its trading environment that enduring tariffs could create.
All told, Whirlpool looks better positioned than UPS to recover from its setbacks in 2025.
