How to Play Whirlpool Stock Following a 24% Drop in 6 Months?

Whirlpool Corporation's (WHR) shares have lost 24.3% in the past six months, underperforming the broader Zacks Consumer Discretionary sector and the S&P 500's decline of 4% and 6.6%, respectively. Meanwhile, the stock has fared slightly better than the industry’s 23.3% fall. This pullback reflects a combination of company-specific challenges and broader macroeconomic pressures.

WHR Price Performance vs. Industry, S&P 500 & Sector

Image Source: Zacks Investment Research

Whirlpool’s performance is closely tied to consumer discretionary spending and the housing market, which have been impacted by persistent inflation, elevated interest rates and higher mortgage costs. As a result, consumers have increasingly shifted their purchasing behavior, delaying or scaling back on large home-related expenditures such as appliances.

Closing the trading session at $79.43 yesterday, the stock hovers close to its 52-week low of $75.04, reached on April 9.

Investors are debating whether WHR is poised for a rebound or stuck in a prolonged slump.

Reasons for the Pullback in the WHR Stock

Whirlpool’s performance has been affected by persistent global demand softness and an unfavorable price/mix trend across key markets. In the fourth quarter of 2024, the company experienced a 1.4% decline in North America sales, primarily due to a significant reduction in trade inventory levels.

This inventory correction, despite strong quarterly sell-through, negatively impacted both pricing and product mix. In Latin America, sales fell 4% year over year, as industry demand remained soft in major markets like Brazil and Mexico, further pressuring volumes. These challenges contributed to an 18.7% year-over-year decline in net sales for the fourth quarter.

On its last earnings call, management issued a cautious forecast for 2025, citing inflationary pressures, supply chain challenges, soft demand trends and an adverse price/mix. Whirlpool anticipates net sales of $15.8 billion, down from $16.6 billion reported in the year-ago period. Ongoing EPS is expected to be $10.00, down from $12.21 per share reported in 2024. The ongoing earnings guidance includes approximately $200 million of cost actions.

Despite forecasting an ongoing EBIT margin of 6.8%, up from 5.3% in 2024, Whirlpool anticipates increased marketing and technology investments to hurt margins by 50 basis points (bps). Additionally, currency fluctuations, particularly the weakening of the Brazilian real against the U.S. dollar, are expected to have another 50-bps negative impact.

WHR’s Valuation Picture

Whirlpool’s premium valuation is becoming a concern amid slowing growth and rising costs. The stock is currently trading at a forward 12-month P/E ratio of 8.04X, significantly higher than the industry average of 6.89X.

This elevated multiple may be hard to justify given recent pressure on margins, softer earnings growth and macroeconomic uncertainties. This stretched valuation could limit upside potential in the near term, especially if performance fails to accelerate meaningfully.

WHR P/E Ratio (Forward 12 Months)

Image Source: Zacks Investment Research

Can WHR’s Growth Efforts Ignite a Recovery?

Whirlpool is taking decisive steps to protect margins and boost productivity through cost-reduction efforts, including organizational simplification and supply chain alignment. Key actions include cutting structural costs, managing working capital efficiently and benefiting from raw material deflation. A major milestone was the sale of its European business, opening doors for future growth.

Product innovation is critical for growth in the future and margin expansion. Whirlpool is strategically positioned for organic growth of 3% in 2025, driven by a strong lineup of product launches. In MDA North America, 30% of the product lineup will be refreshed, marking the company’s largest one-year product transition in over a decade.

How to Play WHR Stock?

Whirlpool has seen a recent stock decline, reflecting several ongoing challenges. Shifting consumer behavior amid persistent inflation and elevated mortgage rates continues to pressure demand. The company’s performance has been adversely impacted by global demand softness and an unfavorable price/mix trend across key markets. These headwinds, coupled with downward revisions in earnings estimates, suggest that WHR's elevated valuation may not be sustainable in the near term.

However, the company’s ongoing product innovation and cost-reduction initiatives aimed at protecting margins and enhancing productivity provide some relief. Currently, WHR holds a Zacks Rank #4 (Sell), indicating a cautious outlook moving forward.

Stocks to Consider

Some top-ranked stocks are The Gap, Inc. GAP, Stitch Fix SFIX and Gildan Activewear Inc. GIL.

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for The Gap’s fiscal 2025 earnings and revenues indicates growth of 7.7% and 1.6%, respectively, from fiscal 2024 reported levels. GAP delivered a trailing four-quarter average earnings surprise of 77.5%.

Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Stitch Fix’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actuals. SFIX delivered a trailing four-quarter average earnings surprise of 48.9%.

Gildan Activewear is a manufacturer and marketer of premium-quality branded basic activewear. It carries a Zacks Rank #2 at present.

The Zacks Consensus Estimate for Gildan Activewear’s current financial year’s earnings and revenues implies growth of 16% and 4.4%, respectively, from the year-ago actuals. GIL delivered a trailing four-quarter average earnings surprise of 5.3%.

Zacks Names #1 Semiconductor Stock

It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.

With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research