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Whirlpool (WHR -19%) sinks toward its lowest levels of 2025 after falling short of revenue estimates in Q4 and issuing gloomy FY25 guidance, targeting earnings and sales below consensus. The household appliance maker continues to run into unabating macroeconomic challenges, including sticky inflation and elevated interest rates, hampering the housing market and dampening consumer sentiment. As a result, revenue fell by 18.7% yr/yr to $4.14 bln in Q4.

• To navigate these pressures, WHR remains committed to taking out costs. During FY24, the company delivered cost-reduction initiatives of around $300 mln. As a result, since 1Q24, WHR increased ongoing EBIT margins by 170 bps sequentially, ultimately lifting FY24's ongoing EPS of $12.21, firmly above its $12.00 forecast.
• Additional cost improvement actions are coming in 2025 to continue countering the unprecedented $2.5 bln in cost inflation witnessed in 2021 and 2022. WHR has eliminated approximately $800 mln in net costs, giving it a long way to go to fill the cost-inflation gap. For FY25, WHR estimates its cost actions, including further simplification and manufacturing efficiencies, will result in $200 mln additional savings.
• Unfortunately for WHR, without a material change in housing market dynamics, the company's cost-saving initiatives will not be enough to support bottom-line growth in FY25. WHR anticipates adjusted EPS of approximately $10.00 this year, an 18% drop yr/yr and significantly below analyst estimates. Meanwhile, due to macroeconomic headwinds, WHR predicts revenue of roughly $15.8 bln in FY25, a 5% dip from FY24.
• WHR provided color on industry dynamics, noting that global volumes will likely be flat in 2025 as it does not foresee a sudden improvement in these headwinds. In North America, elevated mortgage rates will likely result in weak home sales. In Latin America, trends are slightly more favorable, resulting in a potential +3% improvement. Meanwhile, Asia volumes are expected to continue accelerating at +3-5%.
• Speaking of Asia, a major headline from WHR was its decision to reduce its stake in Whirlpool of India, taking it to 20% from 51%. The transaction is expected to generate $550-600 mln of net cash, which WHR will use to pay down its debt this year. The company is eyeing reducing its debt by $700 mln in 2025, improving its net debt leverage to approximately 3.4x.

It has been a turbulent past several years for WHR as it contends with stubborn macroeconomic headwinds clipping demand for new and existing homes while suppressing discretionary demand. Management did mention that replacement demand creates a sturdy foundation for industry volumes, maintaining confidence in medium to long-term growth.

However, the near term remains cloudy, especially with the Federal Reserve signaling higher-for-longer interest rates. Unless demand picks up, WHR's lucrative dividend of 6.5% could be threatened. Management remarked today that it will evaluate its dividend funding, ensuring it aligns with its progress toward its long-term goals. Given WHR's history of either holding or increasing dividends, this commentary is not exactly reassuring, placing additional selling pressure on the stock today.