Whirlpool
was rising Tuesday after a Goldman Sachs analyst upgraded shares of the home appliance company on confidence in near-term initiatives that could drive revenue and margin expansion.
Goldman Sachs analyst Susan Maklari upgraded shares of Whirlpool (ticker: WHR) to Buy from Neutral on Tuesday.
“Over the last six months, Whirlpool has announced a number of initiatives aligned with achieving longer-term revenue, margin, cash flow, and return
targets,” Maklari wrote in a research note. These initiatives include cutting costs by $500 million as supply-chain issues mitigate, and the $3 billion acquisition of
Emerson Electric‘s
(EMR) InSinkErator business in the fourth quarter.
Maklari did recognize near-term headwinds that could negatively impact Whirlpool. With inflation still running hot, consumer spending trends are at risk. Goldman Sachs estimates that appliance industry shipments will likely trough in 2023. Because of this, Maklari lowered her earnings estimates for 2023 to $16.10 a share from $16.60 a share, and cut her 12-month price target to $160 from $170.
However, Maklari thinks the industry has a defensive nature relative to other building product categories as much of demand is heavily driven by replacement, which she believes is partially mitigating the impact of the uncertain economic backdrop.
The analyst also wrote that Whirlpool’s operating margins should improve through 2024 as raw material prices come down, cost reductions take effect and appliance price increases remain.
“After two years of inflation and supply-chain disruptions, we expect lower input costs and improved execution will become tailwinds to operating margins in 2023 and 2024,” Maklari wrote.
Whirlpool is scheduled to report first-quarter earnings on April 25. Shares of the appliance maker were up 3.4% to $133.42 on Tuesday, making the stock the sixth-best performer in the
S&P 500.
The stock has fallen 5.7% this year.
Write to Angela Palumbo at [email protected]
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