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The mood of the market remains negative as stocks are falling hard on the first trading day of February. A weaker-than-expected ISM number can be blamed for the 250-point drop in stocks on Monday morning.
That selling puts the S&P 500 down 5% so far in 2014. We’re almost at the 10% correction mark that so many seemed to be focused on.
As bad as that may seem, it has been far worse for certain stocks. Today’s whipping boy is Whirlpool Corp. (NYSE: WHR). Whirlpool stock tumbled 5% on this first trading day of February alone.
That puts Whirlpool’s total decline at nearly 20% since the stock hit $153.33 at the close on Jan. 23.
In the middle of that sell-off, the company reported earnings. Whirlpool missed earnings estimates for the quarter by a nickel per share, but beat the number on the top line. In addition, guidance for the current year was in line with expectations.
From my vantage point I would look at these results and think that shares would go up, not down as they did.
It seems that all you hear about in the financial media are stories about companies missing estimates on the top line. Earnings are growing, but sales are falling.
Here you have a very explainable earnings miss, but you have top-line results that were better than expected. Why the market did not reward that performance is beyond my comprehension.
Put it in the category of an irrational market once again inefficiently pricing a stock.
All told, the damage to Whirlpool stock has been excessive, not to mention extraordinary. Although the company missed the quarterly earnings number, they did maintain guidance.
If Whirlpool hits the marks in its guidance, it will grow profits in 2014 by 17%. You can now buy that growth for the puny price of less than nine times 2014 estimated earnings.
As for the nickel-per-share earnings miss, who cares? We are talking about a company that made $10 per share last year. Does a nickel miss really matter?
It doesn’t, and yet it did, according to the nut cases that control prices in the market.
You can and should exploit the mispricing in Whirlpool stock by jumping all over shares at these prices. Investors simply do not get opportunities like this very often.