Whirlpool: Bears Maintain Grip Ahead of Earnings (NYSE:WHR)

What do you think of when you hear the word homebuilder? Regular names like Lennar, Pulte and KB Home are known for their highly volatile and cyclical trading behavior.The group actually made a big rally from its notched lows June last year. SPDR S&P Homebuilders ETF (XHB) has risen significantly from its bottom in Q2 2022, outperforming the broader market.

However, the name of one of the funds, Whirlpool, is full of bears. With an important closing date approaching, is it time to turn this household name buying cycle on or should we hit the off button?

Homebuilders Rebound Despite Housing Market Turmoil

According to Bank of America Global Research, Whirlpool (New York Stock Exchange: WHR) leads the world Consumer electronics manufacturer with mid-30% market share in the US and $22 billion in global revenues in 2021. North America is her WHR’s largest market, followed by Latin America, EMEA, Asia and others. Similar to refrigerators/freezers, laundry appliances have historically accounted for about 30% of revenue. Cooking accounts for just under 20% of revenue and other products account for just over 20% of sales.

Uzumaki bear has been in charge of a pair of keys Downgrade The last few months following the recession guidance Announced earlier this month. WHR rolled lower after guidance was cut in October’s third-quarter earnings report.Weak consumer demand was cited as the reason Earnings and Earnings MistakesIn my view, despite last week’s optimistic broad spending outlook by the major credit card companies, there are few signs of improvement and clearly bearish headlines are flying.

upon evaluation, BofA analysts see 2022 earnings falling sharply in 2022. This is undoubtedly due to the work-from-home trend. But how many dishwasher and washer/dryer sets can you buy? As a result, we expect a significantly negative change in EPS between last year and this year. The good news is that BofA expects his earnings per share to increase significantly in 2024.

Meanwhile, the dividend is expected to stay at $7, a solid yield that should be sustainable given the broad market’s impressive free cash flow yield of about double. Pessimism is built in with low GAAP and operating P/E. WHR trades at a heavily discounted EV/EBITDA ratio to the S&P 500.

Whirlpool: Earnings, Valuation and Dividend Yield Forecasts

Data from Koyfin Charts shows that WHR is trading near its long-term average futures earnings multiple, so the stock may not be as expensive as it might seem at first glance. Seeking Alpha notes that Whirlpool’s futures price/earnings ratio is also very close to his five-year average. Overall, the valuation seems fair to me, but a dividend investor can hold onto the stock for his high yield of 4.5%. This is about 120 basis points above his five-year norm.

WHR: Past Forward P/E History

According to Wall Street Horizon’s corporate events data, the fourth quarter 2022 earnings date is Monday, January 30, for AMC, which was confirmed during a conference call the following morning.you can listen live hereMore volatility is likely Tuesday through Thursday, hosted by the National Association of Home Builders. International Builders Show 2023Whirlpool management will be in attendance.

Corporate Event Risk Calendar

Whirlpool is one of many S&P 500 companies to report fourth quarter results this week.

Earnings this week

technical take

With lukewarm valuations and high yields, what does the chart show? We see bearish risks. Notice in the chart below that WHR has shown a bearish double top pattern over 2021-2022 before breaking out of key support in the $197-$215 range. With the bear market in its nearly two-year run, the bulls’ dominance of the stock market since late October may be about to crumble. We spotted a bearish rising wedge pattern. A breakout of the $140-$145 range can lead to a drop closer to $105.

We can also see on the chart that the October lows have carved out a lot of bearish volume. While it has shown yielding lows at times (and it was characterized by a bullish RSI momentum divergence), the absence of strong upward thrust from that level could portend further declines. In 2015, even if we saw a sustained rally, there is a large amount of volume per price just below the resistance points of interest. There are many “corpses” out there that bring stock supplies to the market.

WHR: Bearish Rising Wedge

Conclusion

WHR is an underperforming name, currently without a compelling valuation case. Moreover, ahead of Monday night’s returns, the technical picture is bearish in my view. I will not rely on this name and wait for further declines before deeming Whirlpool’s fundamental and technical conditions clean.