The company is still trying to improve its profitability.
Shares of global consumer appliance company Whirlpool (WHR -10.13%) sank to 52-week lows on Thursday after the company reported financial results for the first quarter of 2024. As of 1:30 p.m. ET, Whirlpool stock was down almost 12%.
Investors don’t like Whirlpool’s struggles
Whirlpool is facing multiple headwinds. First, the company has a lot of debt. Second, inflation has increased its cost of manufacturing. And third, home-appliance purchases have slowed due to a slow housing market, meaning that management has to lower prices to stimulate sales. This is a bad combination.
Whirlpool’s Q1 net sales were down everywhere except for Latin America, resulting in a 3% year-over-year drop to $4.5 billion. The company also had ongoing earnings per share (EPS) of $1.78, which were down 33%, reflecting the higher costs coupled with lower-than-ideal selling prices.
To reduce costs, Whirlpool is laying off 1,000 workers, according to The Wall Street Journal. This will reportedly save it $400 million eventually. But investors don’t necessarily like layoffs because it’s a reminder that the business is struggling. This was also likely on investors’ minds today as they gave up on Whirlpool stock.
Hope on the horizon?
I pointed out ongoing EPS above instead of plain ol’ EPS because it is significant in this case. After Q1 ended, Whirlpool completed the sale of its business in Europe. There were one-time expenses with this deal that are impacting numbers this year. But the move is expected to boost free cash flow long term.
Whirlpool hopes that it can generate around $1.2 billion in free cash flow in 2026 and beyond as a result of the moves it’s making today. Considering its market cap is only at $5 billion today, the stock could be quite the bargain if it executes over the next couple of years.
However, investors need to maintain a level head when evaluating the opportunity with Whirlpool stock. Management said that inflation in Q1 was “sticky” and that efforts to address its costs were “slower than anticipated.” Both statements suggest that things aren’t quite going to plan right now, so investors need to keep some healthy skepticism in mind when evaluating management’s ability to forecast longer-term financials.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
