Key Points
- Institutional pressure has Whirlpool's share in a downtrend.
- The stock is trading at a deep discount and paying more than a 5% yield.
- Near-term headwinds should abate and leave the company in a position to continue paying and raising its distribution.
The institutions have been putting pressure on Whirlpool (NYSE: WHR) stock and that may not change now the Q3 results are in. The company’s report and outlook confirm the notion of a slowdown in the housing sector that will have repercussions for more than just Whirlpool. As for the institutions, they’ve been net sellers for the last two quarters going into Q4 as well and the activity has been on the heavy side. Selling in Q3 alone outpaced buying by an amount equal to 3% of the market cap with shares trading near $131 and this pace may continue. With the institutions holding more than 96% of the stock, there is a chance they could drive it down to the pandemic lows or lower but that is unlikely. Not only is the stock now trading at a deep discount it is offering a very high dividend that not only comes with some safety but a favorable outlook for dividend increases as well.
The Analysts And Insiders Are Holding Whirlpool
The insiders are not selling their shares of Whirlpool stock and the analysts are backing them up. The insiders hold about 1.35% of the stock and haven’t made a sale since Q1 2022. Sales at that time and for the three quarters prior were incredibly light, as well, and there is no indication that will change now. In regard to the analysts, the analysts are rating the stock a Hold and that rating has held firm over the last year. Activity among the group has been light in 2022 and characterized by some price target reductions offset by a single price target increase. As it stands, in the wake of the Q3 results, the price target is holding steady at $194 which is about 50% above the current price action.
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The consensus price target is down in the 12, 3, and 1-month comparisons but holding relatively steady near the $200 level otherwise. Last year, the analysts were looking for a target near $212, and this year it is down $18 or about 8.5% which isn’t much considering the fall in share prices. Even the low price target, which was the most recent set, having come out the day before the Q3 release, is indicating a deep value and potential for a 25% upside for this stock.
Whirlpool Circles The Wagons For Q4 and 2023
Whirlpool’s Q3 results weren’t horrible because they are the 2nd best quarterly results in the company’s history but they give little reason to expect a major rebound in the near term. The $4.78 billion in net revenue is down 12.9% versus last year and missed the consensus estimate by $0.370 billion or over 700 basis points. The weakness was driven by declines in all operating segments that were amplified by FX headwinds. FX headwinds shaved 320 bps off the top-line growth and the weakness was carried through to the bottom line. The adjusted earnings per share declined on a YOY basis as well and also missed the consensus target which led the company to reduce its guidance. The guidance is calling for production to slow by 35%, revenue below the pre-release consensus estimate, and EPS of $19 versus the previous $22 to $24 range.
The takeaway for income investors is that earnings continue to cover the cost of dividends and share repurchases and with room to increase both. The company reported negative cash flow for the quarter and is whittling down its cash pile but this is due to efforts to position for the future, non-cash impairments, and the timing of payments so not a red flag for investors. Even with no change, at the pace the company is going it will be a few years before the cash is gone.
The Technical Outlook: Whirlpool Plunges, Approaches Bottom
The price action in Whirlpool shares plunged more than 5% in the wake of the Q3 report and is expected to open with a loss. The move puts the stock at a new low and downward momentum could build. The next target for support is near the $117 level which was put into place during the pandemic rebound. If that level does not hold, or support does not confirm at a higher level, a fall below $100 is very possible.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Whirlpool (WHR) | $116.55 | +0.7% | 6.01% | 11.49 | Reduce | $106.50 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
