Whirlpool profit higher than expected; stock up

By Ben Klayman

CHICAGO (Reuters) - Whirlpool Corp (WHR.N), the world's biggest appliance maker, reported higher-than-expected quarterly profit on Wednesday on strength overseas, market share gains and continued cost-cutting, and its shares rose more than 10 percent.

While the maker of Maytag, KitchenAid and Amana appliances cut its outlook for industry shipments in the United States, its largest market, it backed its full-year profit forecast.

"I'm amazed that they're able to maintain guidance, given how tough the end market has been," Morgan Keegan analyst Laura Champine said.

Champine, who has an "outperform" rating on the stock, said Whirlpool continued to gain market share as the global low-cost producer's international operations did not begin to weaken as she had expected.

"It's a typical 'when the industry's tough, the big get bigger,'" she said. "Their U.S. business only declined 4 percent in an industry that was down 8 (percent)."

Record costs for oil and metals are compounding woes of appliance makers, which were already grappling with weaker demand in the key U.S. market as slower home sales and rising food and gas costs have led consumers to curb big-ticket buys.

"The cost inflation facing our business is significant, and we continue to take steps to address this challenge," Whirlpool Chief Executive Jeff Fettig said in a statement. "The challenges resulting from significant global commodity inflation have persisted and, in many instances, accelerated."

Last week, Sweden's Electrolux (ELUXb.ST), the world's second-largest home appliance maker, lowered its full-year profit forecast, citing the softer U.S. demand and rising materials costs.

Whirlpool's second-quarter net earnings fell 27 percent to $117 million, or $1.53 a share, from $161 million, or $2 a share, a year earlier. Analysts expected $1.37 a share, according to Reuters Estimates.

Sales at the Benton Harbor, Michigan-based company rose 5 percent to $5.08 billion, better than the $5.01 billion analysts had expected, as rising international sales offset lower U.S. demand from the slumping housing market.

In North America, sales fell 4 percent to $2.9 billion as U.S. industrywide shipments of appliance units fell about 8 percent. Whirlpool expects U.S. shipments to fall 6 percent to 7 percent this year; in April it had forecast a 5 percent to 6 percent decline.

Champine said the new forecast was reasonable. "It doesn't look anymore bearish than we all already are," she said, adding that she expected further price increases in the industry to offset the rising commodity costs.

Whirlpool said sales rose 17 percent in Europe, 22 percent in Latin America and 9 percent in Asia. International sales benefited from the weaker dollar.

Operating profit fell in North America and Europe, but rose in Latin America and Asia.

Whirlpool has raised prices and cut costs by closing some of its plants and shifting production to other facilities to cope with rising steel and oil prices. It said it still expected full-year profit of $7 to $7.50 per share from continuing operations. Analysts currently expect $6.91, according to Reuters Estimates.