Diary of a Financier

Whilpool Reports Blowout Quarter; Closing Position

In Trading Desk on Wed 27 Apr 2011 at 09:44
  • WHR surprised with a huge 1q2011 announced this morning.
  • Closing our position with gains of 12%.

Whirlpool (WHR) just announced a killer 1q2011 in which it surprised the Street expectations with a 28% EPS beat:

Whirlpool Corp beat quarterly profit and sales estimates on cost controls and improving sales in most markets…

Excluding items, the company earned $2.11 a share, handsomely beating the analysts’ average estimate of $1.64, according to Thomson Reuters I/B/E/S.

Sales rose 3 percent to $4.40 billion, well above the analysts’ average estimate of $4.26 billion.

WHR was trading over $91 (+3.5%) premarket so far, which brought our gain in the long position to well over 12%.  Since that’s also above my target of $90, I just closed the position in the opening moments of today’s session.

This is a company which hadn’t released quarterly estimates, but the stock just wasn’t trading appropriately given the valuation offered by the Street and the FY company guidance.  For the rest of the year, WHR management stuck with their $12-13 EPS outlook, but they added a kicker: an increased tax credit benefit.  I saw that tax credit as the biggest risk to our position, something that perhaps justified WHR’s discount.  Its pending expiration still holds, which continues to be the source of low 2012 EPS expectations.

What do I take from their maintaining FY2011 EPS guidance despite the increased tax credit?  Either they’ll beat FY guidance or Operating Income will erode.  Since the latter would make 2012 a disaster, I see no reason to maintain the position.

The charts:

WHR weekly

 
WHR daily extended

WHR daily

–Romeo

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