Whirlpool (NYSE: WHR) shares are getting a boost after the company's Q4 earnings release and 2022 targets, but we aren't betting the farm on this move. The firm is still in excellent shape, and it continues to increase its capital returns, however, inflation has a drag on results. In 2021, wholesale prices and cost-mitigation efforts fully offset the costs of inflation, but inflationary pressure increased in Q4 and 2022 projections show margin compression. We don't expect the stock to go into a cataclysm, and the fundamentals appear to be in place for the stock to rise. However, we do anticipate that it will remain rangebound until later in the year.
A Good Year Despite Inflation
Whirlpool stock had a fantastic quarter, there's no doubt about it, but there are reasons for investors to be concerned. The firm generated $5.82 billion in net sales, up by 0.5 percent year over year, but it fell short of the consensus by 100 basis points. Similarly, the company's revenue was boosted by gains in all categories, albeit at a slightly slower rate than anticipated, owing to the influence of rising costs. Inflation rose by double-digits in all areas but, high-double-digit paces in both EMEA and Latin America that have yet to peak.
Whirlpool recorded a record FY GAAP operating margin of 8.1 percent, but the figure was reduced in Q4. On a GAAP basis, the Q4 margin was 5.1% as compared to higher levels in the prior year and preceding quarter, which may fall further if pricing efforts are not resumed. On an adjusted basis, however, the margin was 8.6%, much better than expected earnings on the bottom line. The adjusted $6.14 was down $0.50 from last year, albeit it outperformed expectations by $0.21.
Looking ahead, the guidance is good versus consensus forecasts, but there has been no notable shift in the analyst's outlook since the fall of 2021. The revenue is anticipated to rise at a 5-6% yearly rate and generate $27 to $29 of adjusted earnings. This is in contrast to the $25.40 and the $26.59 posted in 2021. This indicates that the analysts will raise their estimates, or Whirlpool will exceed the consensus, but there is still a problem. The firm expects only $2.2 billion in cash flow and $1.5 billion in FCF, which are just marginally higher and significantly lower than 2021.
An Increase In Capital Returns Forecasted
Whirlpool is planning to expand its capital return program, but it is not expected to be enough to drive the stock to new highs right now. Moreover, the company is expecting $1.5 billion in returns, which is $100 million less than seen in F21, an increase of only 7%. Given that $1.4 billion was spent on repurchases in 2021, we may anticipate it to repeat itself this year, putting the firm at risk of missing its goals. That is to say, the firm is more likely to raise its dividend, but at a mid to low single-digit rate that we believe may already be reflected in the stock's price. Whirlpool pays out about 2.7% and distributes less than 30% of its profits as dividends, making it an appealing yield regardless of share price movement.
Whirlpool shares are rising in early action as investors cover short positions and there is optimism for future expansion. The stock is up over 3.5%, but it's still significantly below the 30-day EMA, so there's a chance you might be overly enthusiastic. Furthermore, for the past year, the stock has been range-bound and may continue to do so this year. The EMA is the first resistance point, and it might cause a significant reaction. If prices are unable to overcome the EMA, a decline to the $195 to $200 range is anticipated. In conclusion, if price action surpasses the EMA, the next target for significant resistance is $235 to $240.