This American Manufacturer Doesn't Need Donald Trump To Be Great
Since the end of World War II, any investor foolish enough to bet against the ingrained need of Americans to go shopping during a recovery ultimately lost the wager, hence the adage on Wall Street, don't bet against the consumer.
As U.S. economic indicators brighten, that can be changed to, don't bet against Whirlpool (WHR) - Get Report , the largest home appliance manufacturer on the planet. Whirlpool is poised to provide robust total returns in an overbought market.
GOP presidential nominee Donald Trump routinely portrays American manufacturers as non-competitive and gutted by foreign competition, but Whirlpool doesn't need him to return to "greatness."
Whirlpool is a manifestation of the renaissance in the U.S. manufacturing heartland, as old-line companies adopt innovative factory techniques to become more efficient. These reborn manufacturers also are incorporating the latest technology to provide value-added products that consumers want.
Founded in 1911, Whirlpool has evolved from a simple machine company into a global maker of home appliances, generating $21 billion in revenue last year and employing more than 97,000 in 170 countries around the world.
With a market capitalization of $13.62 billion, Whirlpool manufactures and markets air conditioners, dishwashers, freezers and refrigerators, laundry machines, and mixers. Gracing the aisles of every Walmart and big-box retail store are the company's famous if not beloved household names including Admiral, Amana, Estate, Gladiator, Jenn-Air, KitchenAid, Maytag, Roper and Whirlpool.
Whirlpool is scheduled to report second-quarter earnings on Friday. The average analyst consensus is for earnings of $3.37 a share, compared with $2.70 a year earlier.
Further earnings momentum is also in the cards. Third-quarter earnings are projected at $4.11 a share, compared with $3.45 a year earlier.
Full-year earnings are estimated at $14.71, up from $12.38 last year.
One of the surest ways to reap capital appreciation is to latch onto a stock with long-term earnings momentum, and Whirlpool fits the bill.
Whirlpool is benefiting from the economic recovery and leveraging growth by cutting costs, streamlining its supply chain and expanding into emerging markets where rising ranks of middle-class consumers covet the gleaming home gadgets that they see in developed nations.
In the U.S., consumer spending accounts for nearly three-quarters of gross domestic product, providing the growth engine that has pulled the country's economy out of most economic downturns for the past seven decades. Rising home prices, falling joblessness and low interest rates are manna for Whirlpool.
The company's trailing 12-month price-earnings ratio is 19.12, and its five-year expected price-earnings-growth ratio is 0.96. Both yardsticks imply value, especially when compared with the trailing P/E and PEG ratios of major competitors Emerson Electric (19.29 and 3.20, respectively) and General Electric (44.62 and 1.74, respectively).
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Whirlpool's stock has risen 21.82% year to date, but there is plenty of upside left as consumers hit the showroom floor or buy via Amazon.
Whirlpool shares trade at about $178. The average analyst consensus one-year price target is $210.56, which would represent a gain of nearly 18%.
The dividend yield is a healthy 2.18%, rounding out an appealing total return package in this still risky broader market.
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John Persinos is an editorial manager and investment analyst at Investing Daily. At the time of publication, he held stock in General Electric.