Whirlpool (WHR 179.85, +5.05, +2.9%) is the world's leading major appliance manufacturer. Consequently, the company always draws increased attention when it reports its earnings results.
Whirlpool did just that after Monday's close, posting its results for the March quarter. They were disappointing, yet the sting of that news looks to have been diminished by the understanding that the shortfall was related more to fixable issues of Whirlpool's own doing and not so much due to weak demand.
First quarter net sales were $4.8 billion, up 3.7% from the same period a year ago and ahead of analysts' average expectation. Adjusted earnings per diluted share of $2.50, however, came up shy of analysts' average expectation and were 4.9% below last year.
The earnings shortfall stemmed in part from the negative impact from product price/mix and raw material inflation. Those headwinds were offset partially by cost productivity and unit volume growth.
Net sales were up in all regions, with the notable exception of Europe, Middle East and Africa (EMEA), where they slipped 16.7% to $1.0 billion. In North America, net sales jumped 8.3% to $2.6 billion; meanwhile, they surged 16.0% to $818 million in Latin America and increased 12.9% to $419 million in Asia.
The trouble in the EMEA region was related to some currency and demand weakness in the UK, as expected, but it was the challenges Whirlpool faced integrating its acquisition of Italian appliance maker Indesit that caused the real problems.
That integration effort, it was said, was at peak complexity during the quarter, which had the residual effect of creating a temporary disruption in the region's supply chain network and product availability.
Whirlpool expects to get the integration issues worked out and for operating margins in the region to improve sequentially in the second quarter and into the second half of 2017.
Still, Whirlpool was forced to temper investors' earnings expectations for fiscal 2017 as a result of the integration issues. The company now expects to report ongoing business earnings per diluted share between $14.75 and $15.50 versus its prior guidance of $15.25 to $16.25. It left its FY17 free cash flow guidance unchanged at approximately $1.0 billion.
On a related note, Whirlpool continues to expect full-year industry unit shipments in the U.S. to increase by 4-6%. Elsewhere, industry unit shipments are now expected to be flat to up 2% in EMEA, flat in Brazil, and flat to up 2% in Asia.
Shares of WHR initially traded lower in Monday's after-hours action, yet they have reversed course in striking fashion today, helped in part by RBC Capital Markets reiterating its Top Pick recommendation on the stock after the report.