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Will Whirlpool's (WHR) Q2 Earnings Mark a Turn Around?

Whirlpool Corp. WHR is slated to release second-quarter 2017 results on Jul 26. Last quarter, the company posted a negative earnings surprise of 6.4%.

In fact, Whirlpool has reported negative surprise in three of the trailing four quarters, with an average miss of 2.9%. Let’s see how things are shaping up for this announcement.

Whirlpool Corporation Price and EPS Surprise


Whirlpool Corporation Price and EPS Surprise | Whirlpool Corporation Quote

What to Expect?

The question lingering in investors’ minds now is whether Whirlpool will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $3.56, reflecting a year-over-year increase of 1.7%. We note that the Zacks Consensus Estimate has been declining ahead of the earnings release. Analysts polled by Zacks expect revenues of $5.4 billion, up 3.1% from the year-ago quarter.

We note that the stock has outperformed the Zacks categorized Consumer Discretionary sector in the last three months. The company’s shares have increased 5.7%, while the sector grew 2.4%.

Factors at Play

Though Whirlpool’s surprise history is not very impressive, its stock performance remains solid backed by the cost productivity initiatives, solid innovations and robust product pipeline. The company remains focused on its innovation strategy that aids in tapping additional sales and significant market share gains. Moreover, its solid integration and cost-productivity activities have been enhancing performance. These factors, along with a robust brands portfolio have been catalysts for the stock.

These initiatives keep the company on track to deliver upon its long-term goals, which include EBIT margin growth of over 10% by 2020, organic sales growth of 3–5% every year, annualized earnings per share growth of 10–15% and generating free cash flows at 5–6% of revenues by 2018.

Further, the company’s cost productivity programs are in place to deliver improved margins in 2017 and ahead. Evidently, the company delivered solid top-line growth in first-quarter 2017 driven by strength in North America and Latin America.

However, the company’s results in the last reported quarter were impacted by raw material inflation and temporary integration challenges in Europe. Further, the company anticipates the integration related challenges to continue in the near term. Consequently, the company trimmed earnings forecasts for 2017.

While Whirlpool’s long-term plans and solid brands portfolio reflect strength, we cannot ignore the near-term challenges hurting the results. That said, let’s wait and see if the company’s strategic efforts can aid in sustaining the stock momentum.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Whirlpool is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Whirlpool has an Earnings ESP of -3.93% as the Most Accurate estimate of $3.42 is pegged lower than the Zacks Consensus Estimate of $3.56 per share. While the company’s Zacks Rank #2 increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Alibaba Group Holding Limited BABA currently has an Earnings ESP of +4.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Clorox Co. CLX currently has an Earnings ESP of +0.67% and a Zacks Rank #2.

Yum! Brands, Inc. YUM currently has an Earnings ESP of +1.64% and a Zacks Rank #2.

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