Whirlpool: Is a Bottom in Place at $71?

Posted Nov 15th 2010 1:30PM by Joseph Lazzaro
Filed under: Stocks to Buy

Appliance manufacturer extraordinaire Whirlpool Corp's (WHR) shares,

first discussed here on March 13, 2009 at a price of $34.47, over-corrected this summer, and formed a bear-hug.

Typically, that technical move would generate a stand-aside view, but Whirlpool's business model gets the benefit of the doubt here, and the calculation is that a bottom is in place at/near $71.

Look for WHR to generate a 4-6% revenue increase in 2011, after a likely 4-6% revenue rise in 2010, led by strong demand for kitchen and laundry appliances in emerging markets. Latin America sales (especially Brazil) should be particularly strong -- rising better than 10% in 2010 and 2011. U.S. sales should continue to gain momentum in 2011.

Further, Whirlpool's product base is in-sync with the trend toward more energy-efficient appliances -- a tailwind that would only increase if state/federal tax credits for energy efficiency increase.

The Thomson Reuters First Call FY2010/FY2011 EPS estimates for WHR are $9.60 to $8.89. That FY2011 EPS estimate looks about 10% low.

Technically, as noted, in 2010 Whirlpool's stock down-trended from about $119 to $71, where a bottom appears to be in place. A plunge below both $71 and $70 would be bearish, however.

2011 Outlook: I view Whirlpool as a long-term play, but if you're looking to sell WHR within the year, it's probably best to take your profits after it rises to $87-89, if it fails to clear $90.

Stock Analysis: I consider Whirlpool Corp to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in WHR now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my WHR position before January 2011 and I'd put a sell/stop loss at: $53.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: Whirlpool Corp, WHR