Why Whirlpool Stock Crashed in July, and Why It Looks Like an Excellent Value Now

Key Points

• Cutting the dividend was a necessary step to strengthening the balance sheet by helping reduce debt.

• Whirlpool is primarily a U.S. producer, and the tariffs will significantly enhance its competitive position.

• It remains a challenging near-term environment, but if investors can tolerate some volatility, the stock could generate significant returns over time.

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Domestic appliance maker Whirlpool (NYSE: WHR) is one of the most perplexing stocks on the market. Its stock declined 18.1% in July, according to data from S&P Global Market Intelligence, dragged down by a disappointing second-quarter earnings report.

Whirlpool continued to face the pressures that had dogged its first quarter. In the March-ending quarter, Asian competitors pushed through imports of products into the U.S. market ahead of potential tariff actions by the Trump administration, thus creating an intensive competitive environment.

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The administration then applied tariffs in early April, only to announce a 90-day pause on the higher rate of tariffs, except for China. As such, it's hardly surprising that Whirlpool's Asian peers took advantage of the pause to, once again, preload the market with imports.

Whirlpool CEO Marc Bitzer described the situation as follows on the recent earnings call: "We estimate that during the first half of this year, the amount of Asian appliance imports will approach the highest level on record. Needless to say, this preloading has created significant short-term disruption, adding to the promotional intensity throughout the second quarter."

Bitzer believes the pressure on Whirlpool's profit margin created in this environment will extend deep into the third quarter , and management had no choice but to lower its full-year guidance accordingly. The new guidance calls for a full-year ongoing earnings before interest and taxation margin of 5.7%, compared with 6.8% previously, and earnings per share of $6 to $8, compared with $10 previously.

Image source: Getty Images.

Where next for Whirlpool

It's never good news to see a company cut guidance, especially one holding $6.2 billion in long-term debt , with guidance for just $400 million in free cash flow (FCF) in 2025.

Still, Whirlpool stock can make a comeback. First, the significant tariffs imposed on its competitors will eventually hit the competitive position of its rivals, and Whirlpool, a company that produces 80% of its U.S. sales in the United States, is ideally placed to benefit. Second, the dividend cut from $7 per share annually to $3.60 will save about $190 million, the guidance for FCF of $400 million will help, and management aims to generate $500 million to $600 million from the sale of a stake in Whirlpool of India in 2025.

All of that gives firepower to reduce debt by $700 million in 2025, in line with management's plan.

Image source: Getty Images.

Whirlpool in 2026

Moving into 2026, the tariff actions should strengthen Whirlpool's competitive position, and the possibility of an interest-rate cut could alleviate some of the pressure on the housing market and sales of the company's higher margin discretionary market appliances. Trading at less than 12 times estimated FCF in a trough year, Whirlpool is an attractive stock for value investors.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Whirlpool. The Motley Fool has a disclosure policy.