Whirlpool Corporation (NYSE:WHR) has been a great performer in the past year with a gain of over 114%. I think there is still potential for more gains as the company continues to make the right moves in the consumer appliance sector. Two of its chief competitors are consumer appliance companies inside of giant organizations. Whirlpool is able to adapt much quicker to changing market conditions and make inroads into new and emerging markets. As housing continues to recover, demand for home appliances should also increase.
Can't run a home without Whirlpool
Chances are, you have a Whirlpool Corporation (NYSE:WHR) appliance in your home. The company manufactures laundry machines, refrigerators and freezers, cooking ranges, dishwashers, and even portable appliances such as mixers. Its brand names include Whirlpool, Maytag, KitchenAid, Jenn-Air, Amana and many others, and are sold around the world.
Even with the run-up in price, Whirlpool Corporation (NYSE:WHR) still looks attractive. The company trades at a forward price-to-earnings ratio of only 11 and a price/earnings-to-growth ratio of 0.47. Whirlpool has operating cash flow of $814 million a year to service $2.45 billion in debt. It pays an annual dividend of $2.50 per share for a yield of 1.90%. The dividend payout ratio is only 28%, so there's plenty of room to increase the dividend going forward.
In the first quarter of this year, earnings per share came in at $1.97 as compared to $1.41 last year; this was a gain of 40%. Even though sales are rising only in the single digits, the company's focus has been on margin expansion and increasing profits. Operating margins were 9.7% in the first quarter, an expansion of three points year-over-year.
Outlook for growth
Whirlpool Corporation (NYSE:WHR)'s outlook for its North American business depends on the housing recovery. Management sees housing continuing to strengthen and is forecasting growth of 2% to 3%. What I like about the North American business is that this is the market where the company is able to cut costs the most and increase margins.
For top line growth, the company sees that coming from Latin America and Asia. Growth in those regions is forecast to be 3% to 5% this year. Growth is likely to be flat in Europe, but considering the situation there it's a positive that the company isn't losing market share.
Where Whirlpool Corporation (NYSE:WHR) sees the biggest potential for growth is in the Asia-Pacific region, particularly in China. Whirlpool has been in discussions with Panasonic to buy its 30% stake in Sanyo Electric, a Chinese manufacturer of refrigerators and washing machines. If this deal goes through, it would double Whirlpool's market share in China. Currently, only 5% of Whirlpool's revenues come from Asia though this is still up from 3% in 2008. By buying a Chinese manufacturer, it will give Whirlpool a better chance to take on Chinese market leaders Haier, Midea and Little Swan in the fast-growing Chinese market.
Two of Whirlpool's biggest competitors are General Electric Company (NYSE:GE) and Sears Holdings Corp (NASDAQ:SHLD). Both are strong in the home appliance business. General Electric Company (NYSE:GE) has its signature "GE" brand of appliances, while Sears Holdings Corp (NASDAQ:SHLD) has its "Kenmore" brands. The problem for both competitors is that they have too much going on in their businesses outside of appliances. For Whirlpool, this is a competitive advantage.
Besides appliances, General Electric Company (NYSE:GE) has a business in almost any industrial field you can think of as well as a huge finance division. The company did over $145 billion in revenues last year whereas Whirlpool did just a little over $18 billion. If you want to invest in consumer appliances, Whirlpool Corporation (NYSE:WHR) is the place to be and not General Electric.