Motley Fool: Whirlpool’s growth remains hard to ignore
Whirlpool (NYSE: WHR) has been delivering some surprises.
For one thing, instead of laying off workers and moving jobs abroad, it’s hiring – and making hundreds of millions of dollars’ worth of plant upgrades for manufacturing products in … America. You know its name, but you may not realize that it has some other names under its roof, such as Maytag, KitchenAid, Jenn-Air, Amana, Roper, Estate and Admiral.
In the company’s second-quarter earnings report, revenue grew 4 percent to $4.7 billion, while earnings per share jumped 71 percent.
CEO Jeff Fettig said, “Sales increased in every region of the world as we continued to expand margins. Given the strong underlying trends in our business, we recently resumed our share repurchase program and are raising our full-year outlook for EPS and free cash flow.”
Earnings are expected to grow some 26 percent annually over the next five years. The rebounding U.S. housing market is helping, and deals such as one with SodaStream to introduce a KitchenAid-branded home carbonation system is promising, too.
Best of all, the stock is attractive and offers a dividend yield near 2 percent. Its price-to-earnings (P/E) ratio, recently near 17, is above its five-year average of 13.4, but its P/E based on next year’s earnings is just 10. (The Motley Fool owns shares of SodaStream and its newsletters have recommended it.)
Ask the Fool
Q: When, and what, is “earnings season”? – T.W., Watertown, N.Y.
A: We’re in the thick of it. Public companies are required to report on their earnings and financial condition every quarter, and they do so with three quarterly 10-Q reports and an annual 10-K report. They’re free to structure their fiscal year as they want, and while many companies end their years at the conclusion of December, others choose the end of March or some other time.
Earnings reports are typically issued a few weeks after the end of the quarter, and market watchers will see most American companies releasing their reports from early January through February, from early April through May, from early July through August, and from early October through November. These are our four “earnings seasons.” They’re of interest to many investors because new data is available, and analysts and commentators will often issue fresh or revised opinions on companies.
Savvy investors will learn to make sense of the reports themselves – which isn’t as hard as you might think. Stock prices can also surge or swoon on earnings reports, when results are surprisingly good or bad.
Q: I own some stocks with dividend yields below 5 percent and others with yields near 10 percent. Since all the companies seem sound, should I move all the money into the higher-dividend ones? – D.N., online
A: You should focus your money on your best ideas, and be sure to look beyond yields, too.
Remember that one yield might be 8 percent, but the company might be growing very slowly. Another might offer a 3 percent yield, while growing more rapidly and hiking its dividend regularly and significantly – giving you bigger payouts over time.
My dumbest investment
Buying and holding any down-trending stock, including those you recommend, is dumb.
Several years ago, I lost $8,000 waiting for Whole Foods to turn around. I no longer try to catch falling knives, no matter how great the stock might be in five years. With these erratic markets, we can’t trust anyone or anything except the price of the stock and its trend. – E.B.H., Charleston, S.C.
The Fool responds: Careful, there. Focusing just on stock price movements is more like speculating than investing. And where you expect a stock to be in five or more years matters, too, as many stocks take a while to get near their intrinsic value.
Whole Foods’ stock crashed between 2006 and 2008, falling 36 percent, 12 percent and 75 percent. But it nearly tripled in 2009, and gained 84 percent in 2010, 38 percent in 2011 and nearly 35 percent in 2012.
Many stocks are volatile from year to year; it’s the long run that should matter most. Focus on the growers, and be patient.