Trucker strikes and tariffs: Whirlpool lists the reasons for its earnings miss

Whirlpool Corp. has a list of reasons why its second-quarter earnings and revenue missed expectations, including trucker strikes in Latin America and U.S. tariff headwinds.

“In addition to raw material inflation, we experienced a temporary but significant decline in U.S. industry demand, headwinds related to the U.S. tariffs as well as the Brazilian strike in Latin America,” said Chief Executive Marc Bitzer on the early Tuesday conference call, according to a FactSet transcript.

Whirlpool WHR, -13.79%   reported adjusted earnings per share of $3.20, below the $3.69 per share FactSet consensus. Revenue of $5.14 billion was also below the FactSet consensus for $5.29 billion.

Shares have sunk 13.6% in Tuesday trading, putting it on track for the lowest close since January 2016, and the largest percent decrease since October 2011.

“Sales were impacted by weaker-than-expected industry demand in the U.S., slow progress on volume recovery in Europe and the Brazilian trucker strike,” Bitzer said.

About 300,000 units were impacted by the trucker strike, with an earnings before interest and taxes (EBIT) impact of $20 million. Weak local demand contributed $10 million to the EBIT decline, according to Chief Financial Officer James Peters.

Things had been looking up for Whirlpool in the U.S. earlier this year. In January, the company announced that it hired 200 full-time workers in Ohio, anticipating increased demand. And President Trump announced tariffs on imported washing machines and washing machine parts.

“[I]t is too early to quantify the financial impact on 2018,” Bitzer said on the January earnings call, according to FactSet, “but this is without any doubt a positive catalyst for Whirlpool.”

Bitzer also highlighted “rising freight costs, primarily in the U.S. and Brazil due to oil inflation and fleet shortages as well as the conversion impact of short-term volume weakness in multiple regions.” Raw material inflation is blamed for a 125-basis-point margin impact.

Before that, the U.S. International Trade Commission had determined that domestic washing machine companies were under threat from imported machines. The decision came after Whirlpool filed a petition to stop Samsung Electronics Co. Ltd. 005930, -0.75%   and LG Electronics Inc. 066570, +3.32%   from flooding the market.

“[U]ncertainty related to tariffs and global trade actions have also led to increased costs for certain strategic components and finished goods imports and exports,” Bitzer said.

Challenges in Europe include execution issues and shifts in the macroeconomic environment.

Volume weakness in Europe is expected to offset a strong global price mix, according to Bitzer, resulting in flat revenue for the full year. Revenue for 2017 was $21.25 billion. The FactSet consensus is for revenue of $21.39 billion in 2018.

Whirlpool is guiding for EPS of 15 cents to 75 cents, and adjusted EPS of $14.20 to $14.80. The FactSet consensus is for EPS of $15.51.

Still, Bitzer found a few silver linings.

“[T]he actions we put in place over the past few quarters, including cost base price increases and targeted cost reductions throughout the world enabled us to largely offset these challenges and expand ongoing EBIT margins year-over-year,” he said.

Whirlpool shares are down more than 31.6% for the past year while the S&P 500 index SPX, +0.41%   has gained 14.3% for the period.