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Whirlpool's (WHR) Growth Strategies Likely to Aid Q1 Earnings

Whirlpool Corporation WHR is slated to release first-quarter 2019 results on Apr 22, after the closing bell.

The company has delivered a positive earnings surprise in the preceding two quarters. Also, its average four-quarter earnings beat came in at 4.6%.

For first-quarter 2019 earnings, the Zacks Consensus Estimate is pegged at $3.13, reflecting year-over-year growth of about 11.4%. Estimates have also witnessed upward revisions over the past 30 days.

How Things Are Shaping for This Announcement

Whirlpool’s robust product pipeline, solid innovations and cost-productivity initiatives are commendable. Moreover, the company is benefiting from strong execution of higher prices and robust price/mix owing to benefits realized from strategic actions. Solid growth at its North America segment despite sluggish industry demand and higher raw material costs has been aiding quarterly results.

Moving ahead, management expects the North America segment to deliver impressive results backed by price/mix actions as well as gains from U.S. kitchen cost-based price increases that might offset cost pressures. Additionally, a steady offering of innovative products should support continued growth and margin expansion at this segment. The consensus mark for first-quarter revenues at North America is pegged at $2,591 million, up about 3% from the year-ago quarter.

Despite cost-productivity programs, Whirlpool witnessed soft margins in fourth-quarter 2018. Adjusted operating margin was hurt due to elevated expenses, lower unit volumes and adverse currency. In addition, volatility in commodity prices and increased tariffs on steel and aluminum might affect the company’s operating performance in the to-be-reported quarter.

Apart from soft margins, Whirlpool has a dismal sales surprise trend, having lagged estimates for the seventh straight time in the last reported quarter. We note that the EMEA region has been troubled for a while due to soft volumes combined with raw materials inflation and unfavorable currency. For first-quarter 2019 revenues, the Zacks Consensus Estimate is pinned at $4.83 billion, down nearly 1.6% from the year-ago period.

Nevertheless, the company has been taking actions to rightsize its EMEA region by stabilizing volumes across the segment’s core business. It expects volumes for the region to remain positive in the first quarter. These apart, Whirlpool’s efforts to improve margins through a series of measures including cost-based price increments and cost-reduction initiatives focused on improving business efficiency are encouraging. Notably, the company introduced global cost-based pricing for its trade customers to mitigate raw material inflation.

A Look at the Zacks Model

Our proven model conclusively shows that Whirlpool is likely to beat earnings estimates in the first quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
 
Whirlpool has a Zacks Rank #3 and an Earnings ESP of +0.43%, which make us confident of an earnings beat.

Other Stocks Poised to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Columbia Sportswear Company COLM has an Earnings ESP of +1.57% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Red Rock Resorts, Inc. RRR has an Earnings ESP of +4.94% and a Zacks Rank of 3

Marriott International, Inc. MAR has an Earnings ESP of +0.40% and a Zacks Rank #3

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