WHR/John - In the LTP, we sold the 2020 $130 puts for $11.20 and they are back at that price now after falling 14% but what an over-reaction to $3.20/share, which missed $3.63/share expected but last year was $3.35 and it was raw material inflation (steel tariffs) and poor exchange rates that killed them - not something wrong with the company. Margins actually EXPANDED compared to last year.
Adjusted operating profit (EBIT) declined 2% to $343 million from $350 million in the year-ago quarter. However, operating margin expanded 20 basis points (bps) to 6.7%, aided by favorable product price/mix and restructuring benefits, partly negated by raw material inflation, unit-volume declines and unfavorable currency.
Adjusted operating margin of 3.8% contracted 200 bps, mainly due to a trucker strike in Brazil. In dollar terms, operating income declined 42.1% to $33 million.
Revenues from Asia improved nearly 14.7% to $428 million from $373 million in the prior-year quarter. Excluding currency effects, revenues rose 14.5%. Moreover, the segment reported adjusted operating profit of $43 million, up significantly from $10 million in the year-ago quarter. Adjusted operating margin expanded 760 bps to 10.1%. The improvement was driven by gains from an acquisition-related government incentive as well as a favorable product price/mix, partly offset by raw material inflation and negative currency movements.
They also bought back $1Bn worth of their own shares - always stupid.
Following the dismal second quarter and expectations of increased raw material costs in the future, Whirlpool cut its GAAP and adjusted earnings per share forecast for 2018. It now envisions adjusted earnings per share to be $14.20-$14.80 compared with the prior guidance of $14.50-$15.50. On a GAAP basis, it now anticipates earnings of 15-75 cents per share compared with $12.30-$13.30 per share expected earlier.
The company expects to gain from a favorable product price/mix and share repurchases through the rest of the year.
