Whirlpool Free From Brexit Perils: Keeps Guidance Intact

The votes cast on Jun 23, favoring the exit of the United Kingdom from the European Union, has provoked all associated with the country to think about the economical consequences. In response to this decision and a sharp plunge in its stock price in the following two trading sessions, Whirlpool Corporation (NYSE:WHR) addressed its investors to ease them of their worries.

The company conveyed that the uncertainties arising from the ‘Brexit’ vote will not have much impact on its business for now. The company also reiterated its earnings guidance for fiscal 2016 to reassure investors.

Following this action, the stock price of this leading home appliances manufacturer made considerable recovery and closed up 4.3% at $161.04.

The company continues to anticipate GAAP earnings per share in the range of $11.25–$12.00 and adjusted earnings per share of $14.00–$14.75 in fiscal 2016. The guidance is based on the company’s view that the impact of Brexit will not be felt anytime soon and its strength in other global operations. Additionally, the company projects to generate operating cash flows of $1,400–$1,550 million and free cash flows in the range of $700–$800 million.

While the company believes that the risks arising from the Brexit vote will take time to play out, it informed investors that it is prepared for either of the outcomes as it regularly assesses risks while planning its operational cycle. Further, the company is known for using various methods to tackle volatility, one of it being financial hedging.

As for now, the company expects to lower the impact of increased costs in the EMEA region by going ahead with its already announced cost-based price increase strategy in the third quarter and maintaining its strong ongoing cost productivity programs. Also, the company affirmed that it will keep a close check on the developments and swiftly take necessary actions to counter any adverse impact on its EMEA operations.

In fact, Whirlpool derived nearly 5% of its total revenue from the U.K. in fiscal 2015. The company revealed that most of its products that are sold in the U.K. are manufactured in other European countries. The company also emphasized on the importance of its U.K. business and expects to continue delivering innovative products to its customers in the country.

‘Whether or not’ Brexit will have any significant impact on Whirlpool’s financial results is what all of us will have our eyes on. For now, Whirlpool’s story is safe as investors have regained confidence and the stock is headed up.

Zacks Rank

Whirlpool currently has a Zacks Rank #3 (Hold). Some better-ranked consumer discretionary stocks include Virco Mfg. Corp. (NASDAQ:VIRC) , La-Z-Boy Inc. (NYSE:LZB) and Leggett & Platt Inc. (NYSE:LEG) , each holding a Zacks Rank #2 (Buy).