Whirlpool (WHR) Q2 Earnings: What's In Store After Brexit?

Whirlpool Corp. (NYSE:WHR) is slated to release second-quarter 2016 results on Jul 22. Last quarter, the company had delivered a negative earnings surprise of 2.95%. Nevertheless, it has outperformed the Zacks Consensus Estimate by an average of 2.6% over the trailing four quarters, with a beat in three quarters. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Whirlpool recently eased investors' concerns regarding the impact of Brexit on its U.K. operations. Apart from conveying that the uncertainties arising from the ‘Brexit’ vote will not have much of an impact on its business for now, the company also reiterated its earnings guidance for 2016 to reassure investors.

Further, we applaud Whirlpool’s strategic endeavors to improve margins on the back of cost- and capacity-reduction initiatives, encouraging price/mix, growth in adjacent businesses, and synergies arising from the integration of acquisitions. In fact, we think that these solid growth efforts together with the company’s various methods to tackle volatility possibly encouraged management to retain its 2016 view despite the Brexit fallout.

While these factors bode well, the company continues to battle foreign currency headwinds and weak emerging market demand, which marred its sales in the last quarter. Further, these challenges are expected to linger in 2016, wherein the company expects industry unit shipments to fall 10% in Latin America (based on projections of a 10% decline in demand) and remain flat in Asia. Moreover, management had earlier stated that it anticipates the ongoing stronger dollar era to continue throughout 2016, weighing on sales and earnings.

Earnings Whispers

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, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Earnings ESP for Whirlpool is currently pegged at -0.30%. This is because the Most Accurate estimate of $3.36 stands below the Zacks Consensus Estimate of $3.37.

Zacks Rank: Whirlpool’s Zacks Rank #3 (Hold) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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:

Caterpillar Inc. (NYSE:CAT) , scheduled to report earnings on Jul 26, has an Earnings ESP of +2.08% and a Zacks Rank #3.

Amazon.com, Inc. (NASDAQ:AMZN) , slated to report earnings on Jul 28, has an Earnings ESP of +37.72% and a Zacks Rank #3.

AutoNation, Inc. (NYSE:AN) , slated to report earnings on Jul 29, has an Earnings ESP of +4.76% and a Zacks Rank #3.

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