Whirlpool (WHR)
Too little, too late
Whirlpool Corporation has now suspended the rich dividend to common shareholders that far exceeded free cash flow, costing $300 mln in 2025. The goal was to reduce debt, but WHR immediately started a preferred convertible dividend at a much higher equivalent interest rate than the credit facility debt it was apparently replacing. The share price has suffered, but we think there could be more to come.
Despite protestations of austerity, WHR’s cash problems are not getting much better. Little-acknowledged problems in South America could mean more trouble ahead. WHR sales have been in sharp decline, and the recent quarter saw operating profit margins contract by 95% while net earnings fell to minus $85 mln compared with a positive $71 mln in Q1 2025. Guidance for 2026 is tepid at best. We believe WHR’s current cost cutting and pricing initiatives may not be enough to address the company’s fundamental problems. This naked swimmer may face an ebbing tide.
We question whether WHR can easily use all the cash it reports on its balance sheet. WHR has disclosed that 96% of its cash and cash equivalents are “held by subsidiaries in foreign countries”--which seems odd, given the company’s scale of operations in the USA. The reason could be significant potential liabilities abroad.
What’s more, WHR does not appear to be completely candid in its cash receipts and debt payments disclosures. For example, the company claimed to have paid down $900 mln debt in Q1 2026—but that does not show on the quarterly cash flow statement, and the full-year goal is still $900 mln.
Overall, WHR is bringing to light problems that have existed for at least five years. The biggest issue is a structural cost disadvantage compared to major competitors. The company has teetered since 2021 and has been technically insolvent since 2024. WHR has $3.3 bln in accounts payable on top of a debt mountain including notes payable of some $6.5 bln. The company faces structurally high costs that should have been addressed years ago, but WHR chose instead to engage in share buybacks and dividend payments that have left the company weakened.
The fund manager David Tepper went to battle with WHR management and now is withdrawing in disgust. Other investors might consider the same.