Thursday, April 30, 2009

Is Whirlpool Rally for Real?

Whirlpool (WHR) was one of many debt-laden companies that was taken to the woodshed in the first 2.5 months of this year. It's price was halved on concerns about (1) continued housing decline leading to softened demand for its appliances, (2) weakness overseas, and (3) its future pension commitments.

It's now back to similar levels to the start of the year, as it's rallied off the March lows. It came out with its latest quarterly earnings this morning which posted a surprise profit due to cost cuts in Q1 which took effect and about $100MM in gains from a change they made in how they track their pension commitments. Cost savings have driven big gains in surprises we've heard recently in other companies reporting in the last few weeks, although WHR's stock is down in pre-market trading.

However, WHR saw revenues drop 23% in the last quarter. It cut expectations for the rest of the year. Europe declined faster than previously forecast. And, of course, it still has the pension albatross hanging over it.

Doug Kass is readying a piece for later today, in which he suggests taking some money off the table given how far and how fast this market has rallied since his prescient long call of early March.

With that in mind, you need to be making a short-list of weak stocks which have snapped back too much, given their fundamentals. I think WHR is one.

Position: None.

Originally published in on 4/27/2009 8:36 AM EDT

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