Whirlpool Corp. (NYSE:WHR) is folding its European operations into a new company, whose majority owner will be Turkish appliance maker Arcelik. Aside from this, the Middle Eastern and African operations will also be spun off to Arcelik.
The new entity in Europe is estimated to generate $6.5 billion in combined sales per year after the transaction is completed by the end of 2023. Whirlpool is likely to own a 25% ownership stake in the new company.
Regarding the financial impacts at Whirlpool, the deal agreement proved costly for the company in the fourth quarter of 2022, with an alarming loss of $1.5 billion in deal write-down costs and currency adjustments. Due to this, Whirlpool expects the full-year 2022 earnings per share to be impacted by $26-$28. The WHR’s earnings results for Q4 and FY22 will be out on January 25.
The Russia-Ukraine war has impacted the European operations of global firms, which are gradually shrinking their operations across the continent. Meanwhile, due to a sharp depreciation in the Turkish currency, the lira, Turkish exporters are grabbing the opportunity to sell their goods to overseas customers at cheaper rates.
Apart from facing the obvious challenges in Europe, Whirlpool has also struggled with sluggish consumer demand and increasing costs back home in the U.S. In the third quarter of 2022, the company cut production by 35% to reduce inventories. Also, the company had earlier warned of unspecified supply-chain disruptions hurting its North American business in Q4. Fortunately, these supply issues have been resolved as of today.
Is Whirlpool a Good Stock?
Wall Street is bearish on WHR stock, with a Moderate Sell consensus rating based on three Holds and two Sells. The average price target of $131.8 reflects a downside risk of 14.9% in the next 12 months.
