The firm set an "outperform" rating on shares, calling Whirlpool an exceptionally well-managed company.
RBC believes Whirlpool will benefit from a favorable competitive environment in North America.
Benton Harbor, MI-based Whirlpool Corporation is a manufacturer and marketer of major home appliances. The company manufactures products in 11 countries and markets products under brand names including Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana, Bauknecht, Brastemp, and Consul.
Shares closed at $182.52 in yesterday's session.
Insight from TheStreet's Research Team:
Paul Price commented on Whirlpool on a recent post on RealMoneyPro.com. Here is what Price had to say about the stock:
Appliance manufacturer Whirlpool took a big hit Tuesday morning. The stock dropped more than $17 (8.6%) after management reported first-quarter numbers and reduced guidance for the full year.
Quarterly EPS came in at $2.14 (adjusted) vs. a $2.49 estimate. On that adjusted basis, the new 2015 range is $12 to $13, down from $14 to 15. GAAP earnings are now called as $9 to $10.
A Real Money Pro subscriber e-mailed me to ask if WHR was now worth buying. To answer that question, you need to know where Whirlpool's typical valuation fell at key previous turning points for the stock.
WHR has never been a high-multiple name. From 2010 to 2014, it averaged just a 10.8x P/E. WHR's typical yield during that post-recession environment was 2.22%.
Whirlpool traders got enthusiastic in mid-2010 when they pushed the shares to over $118 and 13x forward projections. They accepted a subpar, for WHR, yield of just 1.45%. That was a mistake. By early 2012, the stock had fallen almost 60% as profits contracted from $9.10 to $8.95 per share and were on the way to bottoming out at $7.05.
Counterintuitively, that was a great time to buy. Why? The forward P/E was only 6.8x the already reduced 2012 estimate and the dividend was up to a much-better-than-normal 4.19%.
Buyers in early 2013 and 2014 had the chance to own Whirlpool at under 11x growing estimates. Last year's adjusted EPS of $11.39 set an all-time record. Momentum-chasing traders took WHR all the way to $217.11. That was about 15x the old projections for 2015, which was bad enough, vs. the 10.8x average. The current yield at that price was 1.38%, even worse than what was in effect at 2010's peak.
At this year's pinnacle, WHR was emblematic of the broad market's trend toward P/E expansion and overvaluation. You could only own it if you ignored its past trading history. Standard & Poor's had been recommending WHR before the drop while ignoring its past. Their $251 goal represented 17.5x the now-outdated estimate, something that was farfetched even if things played out better.
In its April 17, 2015, issue, Value Line called WHR "well suited for momentum accounts."
Your best defense is knowing the stock's past market action. That is always real and not somebody's opinion of where it "should be valued."
The reduced expectations leave Whirlpool's $181.20 quote as still looking too expensive. It is 14.5x the new adjusted figure for 2015 with a less-than-wonderful 1.65% yield.
What is a realistic target price? Allow for a ZIRP premium, apply a 12.5x multiple and year-ahead numbers only support a $150, 12-month target price.
There is more risk ahead for WHR, even from Tuesday's lower price.
Want more information like this from Paul Price BEFORE your stock moves? Learn more about RealMoneyPro.com now.
Separately, TheStreet Ratings team rates WHIRLPOOL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate WHIRLPOOL CORP (WHR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
You can view the full analysis from the report here: WHR Ratings Report
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