WHR WHIRLPOOL CORPORATION
Sector financial performance:
This company, which is primarily an appliance manufacturer, has been grouped into household appliance sector in household equipment industry.
Demand for US companies’ products seems to be declining after entering 2018 as indicated by the declining sales units of those companies (more than 5% decrease in sales units in 2Q 2018) while products mix keeps shifting to higher price products. In fact, there has been a downward trend in growth in sale units in North America and Europe regions in the past several years while it has been offset by increase in volume from Asia market and by product/mix’ shifting to higher price products. Based on typical company’s data, the product mix has been shifting to higher price products since 2015.
The decreased sales in 2018 have not impacted companies’ gross margin, which has basically no changes and has been at around 17% with a SG&A as percentage of sales of about 10%. The typical operating margin is at around 5% in 2018.
The typical average enterprise price/EBI ratio is: 27(interest/EBI ratio of 38%) and enterprise price/sales ratio is 0.7.
It seems that the demand for products of this company started to decline after entering 2018, which continues the downward trend of growth in sales volume in North America and Europe market. The decreased demand/volume in regions mentioned above finally caused a negative growth in sales for this company since the large decrease in sale units in 2018 was not offset by increasing volume in Asia and favourable products/sales mix as they have done in the past several years.
The first six months of 2018 compared with 2017
Organic net sales decreased 2.7% (4.5% for 2Q) due to decrease in sales volume offset by favourable product/mix.
The 2017 compared with 2016
Organic net sales increased 1.5% due to favourable product/mix.
2016 compared with 2015
Organic net sales increased 1.6% due to increase in sales volume offset by unfavourable product/mix.
Fiscal 2015 compared with 2014
Net sales (excluding foreign currency) increased 18% due to increase in sales volume as a result of acquisition.
Its gross margin has gone down by about 50 basis points to around 17% in 2018. The SG&A as percentage of sales has been flat and its operating margin has thus gone down to around 5% in 2018.
This stock currently has an enterprise price/EBI ratio of 27 ($130). We think that its stock is being relatively overvalued considering current multiple.