Here's Why Whirlpool Surged 13% Today (and Why There Could Be More to Come)

When a stock is as unloved as Whirlpool (NYSE: WHR), a mere reiteration of full-year expectations in an earnings report can cause the stock to soar. That happened after the company released its third-quarter earnings after the close of trading on Wednesday evening. By 11 a.m. ET today, the stock was up 13%.

It's not that bad

Given the deterioration in the housing market and Whirlpool's trading environment through 2024, it was reasonable for investors to fear the worst going into the third-quarter earnings report. Still, the results were good enough, and management maintained its expectations for ongoing earnings before an interest and taxation (EBIT) margin of 6%, ongoing earnings per share of $12, and free cash flow (FCF) of $500 million.

Hitting these numbers would put the stock at 9.3 times earnings and 12.3 times FCF, based on the current price. Those are good valuations for a company with sales that should improve when lower interest rates start stimulating the housing market and, in turn, demand for domestic appliances.

Will Whirlpool hit its guidance?

The company's largest earnings generator (and the swing factor in its earnings) is its major domestic appliance (MDA) North America (North America) segment, and there was good news for investors there. On the second-quarter earnings call, CFO Jim Peters promised "greater than 100 basis points of sequential margin expansion" in each quarter of the second half, and the company plans to exit 2024 with an EBIT margin of about 9%.

Image source: Getty Images.

Management delivered (just), with MDA NA EBIT margin up 7.3% from 6.3% in the second quarter. Whirlpool will need another 170 basis points to reach 9%, but price increases, ongoing cost cuts, and a possible improvement in higher-margin discretionary MDA purchases might get it there. If so, the stock can appreciate from here, given its low valuation.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,803!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $43,654!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $404,086!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of October 21, 2024

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Whirlpool. The Motley Fool has a disclosure policy.