Tariffs And Asian Imports Will Restrict But Encourage Domestic Opportunities

Key Takeaways

• Increased imports from Asian competitors and tariff pressures may suppress US sales and reduce net margins.
  
• Currency shifts and product portfolio overhauls could constrain earnings, introducing volatility in revenue and forward earnings growth.
  
• Domestic production benefits from tariffs, leveling competition and enhancing margins, while innovative products and pricing actions support sales and EBIT growth.

Catalysts

Manufactures and markets home appliances and related products and services in the North America, Latin America, Asia, and internationally.

• Whirlpool's revenue could be adversely impacted as the market anticipates continued headwinds from increased imports by Asian competitors pre-loading ahead of impending tariffs, which might suppress sales volume in the US.
  
• The company's net margins might come under pressure, as the increase in tariff-related costs could exceed mitigation efforts such as pricing actions and cost takeout plans, leading to narrower profit margins.
  
• Whirlpool's earnings per share might be negatively affected as the company deals with unfavorable currency shifts, such as the depreciation of the Brazilian real impacting margins in Latin America, thereby constraining earnings growth.
  
• The anticipated overhaul and transition of over 30% of Whirlpool’s product portfolio in North America could lead to significant costs and risks associated with execution, potentially impacting the bottom-line growth for the year.
  
• The uncertainty of the macroeconomic environment, including potential changes in trade policy and tariffs, is expected to introduce volatility and unpredictability in revenue growth, making forward earnings less reliable.

Whirlpool Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Whirlpool compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Whirlpool's revenue will grow by 1.4% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 0.0% today to 4.1% in 3 years time.
• The bearish analysts expect earnings to reach $668.4 million (and earnings per share of $11.64) by about July 2028, up from $7.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 7.7x on those 2028 earnings, down from 790.2x today. This future PE is lower than the current PE for the US Consumer Durables industry at 10.4x.
• Analysts expect the number of shares outstanding to grow by 1.3% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.39%, as per the Simply Wall St company report.

Whirlpool Future Earnings Per Share Growth

Risks

• Whirlpool’s strong domestic production base, with 80% of U.S. sales being produced domestically, positions the company to benefit from new tariff policies, potentially leading to improved revenue and profit margins.
  
• The implementation of newly announced tariffs is expected to create a level playing field, eliminating previously existing cost disadvantages against Asian competitors, which can enhance Whirlpool’s competitive position and market share, positively impacting revenue.
  
• Successful pricing actions and cost takeout measures already significantly contributed to margin improvements; should these actions continue effectively, they may drive further EBIT margin expansion.
  
• Whirlpool has a robust pipeline of innovative product launches in 2025, backed by positive market responses, which are anticipated to drive organic sales growth and expand EBIT margins in the second half of the year.
  
• The company is confident in its ability to navigate the challenging macro environment and deliver on its annual guidance, supported by anticipated benefits from tariffs and new products, leading to stable or improved ongoing earnings per share.

Valuation

• The assumed bearish price target for Whirlpool is $65.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Whirlpool's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $145.0, and the most bearish reporting a price target of just $65.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $16.4 billion, earnings will come to $668.4 million, and it would be trading on a PE ratio of 7.7x, assuming you use a discount rate of 11.4%.
• Given the current share price of $99.47, the bearish analyst price target of $65.0 is 53.0% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.