Whirlpool Corp.

Very high inflation has been evident throughout the economy and Whirlpool is particularly exposed to rising steel and resin costs. The company expects about $1 billion of raw material cost inflation in 2021, which it expects to offset through pricing, mix, and the previously discussed structural cost reductions. It is nevertheless possible inflation will escalate above these levels--though we note Whirlpool's overall success passing through tariff-induced steel inflation a few years ago--or supply chain inefficiencies could pressure profitability. We assume that high inflation and increased brand and technology investments will result in moderate EBITDA declines going forward, though profits will remain solid, with EBITDA margin around 13% and 12.5% in 2022 and 2023, respectively. The stable outlook reflects our expectation

...We expect continued strong operating performance and improved credit metrics in 2021 with modest weakening assumed in 2022. We believe demand for Whirlpool appliances will remain healthy over the next few years because more people will work from home compared to before the pandemic, facilitated by improved technology and potentially due to sustained changes in consumer spending habits toward housing upgrades. This should result in continued high appliance usage. Moreover, appliance failures will likely increase following heavy use during the pandemic, leading to more replacement demand, which should be further supported by the lapping of the 2008-2010 industry trough. The useful life of large appliances is typically about 10 years, so more appliances failures are likely over the next few years. Overall, we expect these tailwinds will result in sales growth of about 13% in 2021 to about $22 billion. This will lead to adjusted leverage improving to below 1.5x in 2021 compared to 1.9x as of...

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