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Whirlpool (NYSE:WHR) has been downgraded to Neutral from Overweight at JPMorgan on Tuesday, with the price target cut to $137 from $145 per share.
JPMorgan analysts told investors in a note that they expect WHR to perform in line with expectations, supporting a Neutral rating.
“While we continue to view the stock as inexpensive, currently trading at only roughly 5.2x our 2023E EBITDA, we believe that investor concerns regarding the sustainability of North American margins will continue to impact valuation, which may increase over the next 6-12 months amid a potentially more promotional and competitive backdrop, while lastly, we point to the company’s elevated leverage following their acquisition of InSinkerator, currently at 2.8x net debt/2022E EBITDA vs. our universe average of 1.9x,” the analysts said.
They also said the re-rating reflects the firm’s outlook for recent investor concerns and headwinds, including the sustainability of demand and the company’s recently elevated earnings, several companies’ European exposure, continued cost inflation, and the higher interest rate backdrop and a potentially slowing U.S. macroeconomy.
“Hence, as our newly adjusted Dec. 2023 price target of $137, which is now based on a roughly 5.5x target EV/EBITDA multiple against our 2024E EBITDA, represents a return potential roughly in-line with our universe average, we expect WHR to perform in-line with its peers, which in turn supports our Neutral rating,” the analysts concluded.
