Product Launches And Cost Savings Will Boost Competitiveness In Consumer Durables Market In 2025

Key Takeaways

• Portfolio transformation and innovative products are expected to boost revenue growth and improve margins through strategic market moves.
  
• Reduction in ownership stake in India aims to improve financial leverage by utilizing proceeds for debt repayment.
  
• Inventory challenges and weak home sales, combined with currency and geopolitical risks, could pressure Whirlpool's margins and constrain revenue growth.

Catalysts

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

• Whirlpool's completion of the Europe transaction as part of its portfolio transformation is expected to unlock significant value creation opportunities, which could contribute to revenue growth and improved net margins.
  
• The announcement of a reduction in promotional pricing depth and the introduction of new innovative product lineups in 2025 are anticipated to drive a favorable price/mix, potentially boosting revenues and operating margins.
  
• Cost takeout actions totaling $200 million have been identified for 2025, with additional opportunities being explored. These actions are expected to enhance net margins by improving operating efficiencies.
  
• The planned transition over 30% of Whirlpool's product lineup, including a large-scale introduction of higher-mix products in North America, is expected to increase market share and potentially uplift average selling prices, positively impacting revenues and earnings.
  
• The anticipated reduction of Whirlpool's ownership stake in Whirlpool of India is expected to generate net cash proceeds of $550 million to $600 million, which will primarily be used for debt repayment and could improve Whirlpool's financial leverage and overall net earnings.

Whirlpool Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Whirlpool's revenue will decrease by 0.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from -1.9% today to 4.5% in 3 years time.
• Analysts expect earnings to reach $730.3 million (and earnings per share of $13.03) by about March 2028, up from $-323.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $828 million in earnings, and the most bearish expecting $594 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.2x on those 2028 earnings, up from -16.3x today. This future PE is greater than the current PE for the US Consumer Durables industry at 10.9x.
• Analysts expect the number of shares outstanding to grow by 1.37% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.41%, as per the Simply Wall St company report.

Whirlpool Future Earnings Per Share Growth

Risks

• The expected slow and gradual improvement in the U.S. housing market during 2025 and weak existing home sales due to elevated mortgage rates could constrain revenue growth and limit the potential for volume increases.
  
• Inventory challenges, such as significant retailer destocking, impacted North American sales negatively in the fourth quarter and could continue to affect inventory efficiency and sales forecasting accuracy, potentially impairing earnings.
  
• Currency fluctuations, particularly the weakening of the Brazilian real against the U.S. dollar, are anticipated to reduce margins by approximately 50 basis points, which could pressure net margins and overall profitability.
  
• Increased investment in marketing and technology due to new product launches will impact margins unfavorably by 50 basis points, adding pressure to net margins and affecting earnings in the short term.
  
• The uncertainty surrounding potential geopolitical trade policy changes, such as tariffs, could increase costs or disrupt supply chain, impacting revenue and net profit margins if unfavorable policies are enacted.

Valuation

• The analysts have a consensus price target of $112.714 for Whirlpool based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $137.0, and the most bearish reporting a price target of just $81.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $16.3 billion, earnings will come to $730.3 million, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 11.4%.
  
• Given the current share price of $94.87, the analyst price target of $112.71 is 15.8% higher.
  
• 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.