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Zacks Industry Outlook Highlights: Whirlpool Corporation, Howden Joinery Group and Electrolux

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·9-min read
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For Immediate Release

Chicago, IL – December 21, 2021 – Today, Zacks Equity Research discusses Home Appliance, including Whirlpool Corporation WHR, Howden Joinery Group Plc HWDJY and AB Electrolux ELUXY.

Link: https://www.zacks.com/commentary/1840958/3-home-appliance-stocks-to-watch-amid-supply-chain-woes

Players in the Zacks Household Appliances industry have been witnessing strong consumer demand for kitchen and home appliances. Increasing focus on home-improvement investments has continued to drive demand. The industry participants stay poised to gain from shifts to online shopping for electronics.

Nevertheless, the industry has been battling headwinds related to supply delays of electronic components and finished goods, higher raw material prices, and elevated transportation and freight costs. This resulted in production inefficiencies, supply-demand mismatches and higher logistic costs.

Amid the tough times, investments in product innovation, cost-saving efforts and pricing actions make players like Whirlpool CorporationHowden Joinery Group and Electrolux stocks worth watching.

About the Industry

The Household Appliances industry comprises companies that manufacture and market home appliances and other related products. Household or domestic appliances include electrical and mechanical devices, which facilitate chores like cooking, cleaning, laundry or food preservation.

The companies in the industry make refrigerators, washing machines, water coolers and heaters, microwave ovens, toasters and coffee makers, among other devices. The companies sell products through a network of mass merchandisers, retailers, distributors, dealers, and other builders and outlets. In an era of automation, players in the industry are committed to constant technological enhancements to offer smart home appliances (for instance, voice-activated and hands-free devices).

What's Shaping the Future of the Household Appliances Industry

Supply-Chain Headwinds: Industry players have been witnessing pressures related to the global supply-chain disruptions and rising raw material costs. The supply-chain disruptions have resulted in delays in the supply of electronic components and final goods. This, in turn, caused production inefficiencies, supply-demand mismatches, and higher logistic costs. These have been hurting the industry participants’ top lines and margins.

Although companies are implementing various measures to combat the headwinds through price increases, they expect the inefficiencies across the supply chains, particularly in distribution and labor, to continue. With most household appliance producers having operations across continents, the impacts of these factors are likely to get reflected in their near-term results.

Raw Material Cost Inflation: Prices of raw materials like steel, resins and aluminum remain volatile. The industry players continue to anticipate the global cost inflation, largely in steel and resins, to remain a headwind. Companies expect supply-chain disruptions and rising raw material costs to negatively impact their businesses in the near term. Volatility in oil, plastic or other secondary raw material prices is also concerning. The expenses have been raising operational costs year over year, eroding the industry participants’ profits.

Strong Demand & E-commerce Growth: The surge in demand for household appliances and the rising popularity of online shopping have been aiding the companies. Consumers continue to allocate a larger share of their budgets for home-improvement projects and buying household appliances, adding to the sales of the home appliances companies.

The companies expect the robust demand to continue aiding their top lines in the near term. Even though consumer mobility has increased, consumers continue to shop for electronics online, driven by the shift in buying patterns during the pandemic. The companies expect to benefit from the continuity of these trends in the near term.

Innovation: Increased technological advancements, rapid urbanization, a rise in income, improved living standards, change in consumer lifestyle and a surge in need for household comfort are the key driving factors for the industry. The demand for fast-accessible and remotely monitored home appliances has been consistently rising, compelling the industry players to invest in innovation and R&D to come up with differentiated and handy products. Appliance makers are installing smart grids, thermostats, digital inverter compressors and other monitoring sensors to make devices more energy-efficient.

As a result, household appliances are becoming more high-tech, embedded with smart sensors and IoT-enabled technology. Such rampant innovation can significantly boost the companies’ top lines. The industry players are resorting to pricing actions and cost-productivity programs to boost margins and profitability.

Zacks Industry Rank Indicates Dull Prospects

The Household Appliances industry is housed within the broader Zacks Consumer Discretionary sector. It currently carries a Zacks Industry Rank #226, which places it at the bottom 11% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the next year have moved down 77.1%.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry vs. Broader Market

The Zacks Household Appliances industry has underperformed the broader Consumer Discretionary sector and the S&P 500 Index over the past year.

Stocks in the industry have collectively fallen 66.9% compared with the Consumer Discretionary sector’s decline of 11.9% over a year. The S&P 500 composite has risen 25.5% during the same period.

Household Appliances Industry's Valuation

On the basis of the forward 12-month price-to-earnings (P/E) ratio, a commonly used multiple for valuing Consumer Discretionary stocks, the industry is currently trading at 9.93X compared with the S&P 500’s 21.27X. Further, the sector’s forward-12-month P/E ratio stands at 21.49X.

Over the last five years, the industry has traded as high as 11.21X, as low as 5.61X and at the median of 8.99X.

3 Household Appliance Stocks to Watch

None of the companies in the Zacks Household Appliances universe currently sport a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). We have highlighted three stocks with a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Whirlpool Corporation: The company is one of the largest manufacturers of household appliances in the world. Whirlpool, based in Harbor, MI, has been benefiting from higher home appliance demand across several markets, particularly a spiked demand for its kitchen and cleaning appliance product lines. The company’s strong market presence and superior brand image position it well to capture the increasing customer demand for home and kitchen products. Whirlpool has been on track with its cost-based pricing initiatives to protect margins and productivity.

The company is on track with efforts to navigate the industry’s challenges and deliver strong performance in the forthcoming periods. As part of its long-term value creation goals, Whirlpool expects annual organic net sales (excluding currency) growth of 5-6% and an annual Adjusted EBIT margin of 11-12%. The stock has rallied 23.4% in the past year. The Zacks Consensus Estimate for WHR’s 2021 and 2022 earnings per share have been unchanged in the past 30 days.

Howden Joinery Group: The London-based company, which manufactures and sells kitchen and joinery products in the U.K., France, Belgium, the Netherlands and Germany, has gained 34.1% in the past year. The company is poised to gain from the introduction of innovative kitchen ranges. It introduced 18 kitchen ranges in 2020, with the new Hockley ranges having cabinet doors manufactured by Howden.

The company is expected to benefit from the development of a digital platform for its website to enhance digital capability and reinforce the Howden model. The Howdens.com web platform has been improving brand awareness, leading to increased web visits. Online brochure requests and resulting depot contacts, and “anytime ordering” launched for trade customers also bode well. The Zacks Consensus Estimate for HWDJY’s 2021 and 2022 earnings per share has been unchanged in the past 30 days.

Electrolux: The Sweden-based company manufactures and sells household appliances in Europe, North America, Latin America, the Asia Pacific, the Middle East and Africa. The company sells products under the Electrolux, AEG, and Frigidaire brands. Gains from strong consumer demand, volume growth, higher pricing and product mix improvements have been aiding the top line. Revenue contributions have been offsetting the higher costs of external factors, including higher raw material prices.

The company focuses on high-quality appliances to boost user experience. This along with its innovation efforts has been aiding the demand for its highly featured products, leading to a favorable product and brand mix. The Zacks Consensus Estimate for ELUXY’s 2021 earnings per share moved down 0.7% in the past 30 days, while the consensus estimate for 2022 improved 0.6% in the same period. The ELUXY stock has gained 1.3% in the past year.

 

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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