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Is Whirlpool Corporation (WHR) Still a Good Investment?

Bulls eye Whirlpool call optionsThe sharp rise of Whirlpool Corporation (NYSE:WHR) in the stock market hasn’t gone unnoticed, and I recall many analysts and traders, including Jim Cramer, making calls to buy Whirlpool. Is this company still a viable investment? Will it meet its 2013 projections? Let’s find out!

Shares of Whirlpool Corporation (NYSE:WHR) have sharply risen by 28% year-to-date. Moreover, in the past year, the company’s stock spiked by 121%. Let’s examine the recent developments in the U.S appliances sector and then turn to Whirlpool’s outlook for 2013.

Are appliances sales rising?

Based on the latest retail sales report, U.S retail sales slightly increased by 0.1% in April compared to March and by 3.7% compared to the same month last year. On the other hand, the full report reveals that electronics and appliance-store sales declined during the first four months of 2013 by 0.7% compared to the first four months of 2012.

Conversely, in April this sector’s sales rose by 0.8% compared to March. This means U.S electronics and appliance-sector sales have declined in the first quarter of 2013 but have rallied in April. If this trend persists, then in the following quarters the revenue of leading electronics and appliance stores and manufacturers is likely to reflect this growth.

Outlook for 2013 and first-quarter performance

According to Whirlpool Corporation (NYSE:WHR)’s 2013 outlook (opens pdf) most of the growth in revenue will come from Latin America (3% to 5% gain) and Asia (3% to 5%). Moreover, the company also projects its revenue in North America will rise by 2% to 3%.

Based on first-quarter results for 2013, the company’s net revenue slipped by 2.3% (year-over-year); Whirlpool’s revenue in Latin America fell by 5% and in Asia by 8%. In North America, revenue remained flat. These results are much different than what the company is projecting for 2013.

On the other hand, the company still has many strong points: the company’s gross profits rose from 15% in Q1 2012 to 17% in Q1 2013 due to a drop in sales expenses; the decrease in expenses is a good sign that the company is finding ways to augment its profits, which could eventually lead Whirlpool Corporation (NYSE:WHR) to raise its dividend again; in April, the company raised its dividend by 25% to reach an annual yield of 1.9%.

Whirlpool is also financially stable with a debt-to-equity ratio of 0.5. The company’s negative free cash flow in the first quarter of 2013 that reached more than $418 million isn’t likely to raise its risk (for now) considering it has more than $750 million in cash.

But turning back to the drop in sales, this issue could impede the progress of Whirlpool Corporation (NYSE:WHR)’s stock; specifically, the company’s fall in revenue in Latin America and Asia. In this regard, its growth in sales in these regions is likely to be affected by two issues: The economic progress in these regions and competition from other leading appliances and electric companies. Let’s take these issues in order.