The home appliances manufacturer reported last week fourth-quarter earnings of $205 million, or $2.62 a share, an increase from year-earlier earnings of $171 million, or $2.19 a share.
Shares of the company sold off at the end of December when retailer Sears (SHLD) announced declining holiday sales and that it would be closing up to 120 Kmart and Sears stores.The stock fell about 47% in 2011 and has risen 49% year to date. Whirlpool is benefiting from an improving economy. "Whirlpool expects to generate $100M-$150M of FCF (before dividends) as cash sources are projected to exceed cash uses of $914M. Including dividends ($148M in FY11), we see FY12 FCF flat to slightly negative, making it likely that the Company will refinance its $350M May 2012 notes," Bank of America Merrill Lynch analysts wrote in a Feb. 7 report. "Leverage at 1.7x total debt/EBITDA [earnings before interest, taxes, depreciation and amortization] is low relative to its low-BBB credit rating and incremental debt issuance should not result in negative ratings actions. An upgrade to WHR's mid-BBB target in FY12 would require a significant improvement in industry outlook and solid top-line and EBITDA growth, which we think is unlikely given the macroeconomic backdrop." Whirlpool was upgraded to a buy from a from a hold by TheStreet Ratings. Of the seven analysts who cover the company, three rated it a buy. Two analysts considered the company a hold and two considered it a sell. Whirlpool has an estimated price-to-earnings ratio for next year of 9.42; the average for durable household product companies is 11.34. For comparison, Tupperware (TUP) has a forward P/E of 11.06 and Lifetime Brands (LCUT) has a forward P/E of 6.66. TheStreet Ratings gives Whirlpool a B- grade with a $81.70 price target. The stock closed Tuesday at $70.70.
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