Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
I've uncovered numerous *interesting* nuggets looking through Whirlpool's filings.

* Earnings are overstated due to extreme tax benefits (Brazilian export taxes and energy
credits in the US)

* Reported debt is something like $2.5 B (37% debt to cap), but including the company's
pension obligation and postretirement benefit obligations brings debt up to $4.6 B (52%
debt to cap)

* The company is going to have to spend $200-300 MM to chip away at its underfunded pension
each year for the next few years -- that hurts future FCF

* WHR's debt maturity schedule is hard-hitting and short dated, with major expirations in 2011,
12, 13, and 14

* The company changed its PP&E depreciation techniques. The change makes sense, but it
will have positive impacts on earnings in the near term -- I just don't like to see
these sorts of things

With all that said, shares still seem fairly cheap. A quick, back-of-the-envelope earnings power valuation suggests that at $70 shares are priced for no growth. With shares at $80, there ain't much growth baked in.

I need to do more valuation work, assess growth prospects, and put it all together, but I suspect that recent operational improvements will have greater impact than most think (margins will surprise on the upside).

Even so, this is a low margin business, with considerable (but managemable) debt loads, with a ubiquitous "international growth" story, that seems well run. I'll have to consider what margin of safety is appropriate, but there is clear upside with a housing recovery. I won't pay for that given that I haven't a clue if/when it will materialize, but on an ex-recovery basis shares may still be attractive.

Bryan
TMF42
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.