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Whirlpool (WHR; Baa2 Neg/BBB-/BBB Neg) Moody's neg. outlook

CONSUMER CYCLICALS

Moody's joining fitch on neg. outlook but has kept ratings unch. 1H results were rough; co is running a 5.3% EBIT margin, FY guidance for 6% (still below pre-covid levels) and consensus looking for a 3rd straight year of falling sales. We see BS levered a hefty net 5.2x.


  • Moody's is balancing above with scale ($20b in sales), strong market position in NA and LATAM and co's net 2x target (co reported net 4.7x at June).
  • It expects priority to de-leveraging if operating performance does not recover. We don't see any signs of that yet - co is guiding to $400m in dividends this year against only $500m in FCF. It has already done $50m in buybacks on top of that.
  • It admits co's leverage is elevated at gross 5.7x (we have 6.1x) and continued dividend payments will limit progress.

Front maturity is the $350m May '25 line. Liquidity is not a issue with $1.2b of cash on hand. Moody's expects an eventual pickup as cycle bottoms out (home sales activity driven in part by interest rates). We'd exercise caution, curve does not give much width vs. Fnac Darty 29s (NR/BB+) - trades +140bps north of it. We will circle back on Fnac but its lower levered and showing (some) stabilisation in performance - we are not endorsing it - see Wizz26 risk for better short-end value (Fnac has short OAS duration of 2.1yrs on high cash px). We have similar & more worries for Electrolux (NR/BBB). For rotations out of both with no spread-give up we encourage looking at IG consumer services (Pluxee, ISS etc.).

The "rumoured" Bosch bid that was later (effectively) downplayed as not happening by mgmt has been reversed - for those wondering why the lines went bid in late June it was on the possibility of that composite rating uplift. Equities did pare back nearly all the gains in the days following Bosch mgmt comments as well (recently look tad bid on no news).

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