Shares in household appliances company Whirlpool (WHR -5.04%) declined by more than 5.5% by 3 p.m. ET today. Outside a rise in market interest rates (the 10-year Treasury rate is now up to almost 4.5%, putting pressure on interest rate-sensitive stocks like Whirlpool), there’s no stock-specific reason for the decline.
Whirlpool’s challenging 2025
Investors in Whirlpool can expect more volatility leading up to its second-quarter earnings report on July 29. While the stock has had an impressive run-up over the last three months (up 26%), it still faces significant near-term headwinds. Not only are interest rates stubbornly high and negatively impacting the housing market and therefore, demand for higher-margin discretionary purchases of household appliances, but the tariff conflict and the fear of further tariffs have likely caused Asian competitors to push products into the U.S. market.
It all creates an uncertain near-term trading environment in a company with a dividend that cost $384 million in cash last year, $4.8 billion in debt (with $1.85 billion maturing in 2025), and pressure on its full-year guidance for $500 million to $600 million in free cash flow in 2025.
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Long-term potential
As such, don’t be surprised if Whirlpool cuts its dividend this year. That said, it might turn out to be a positive for the stock, as it would help alleviate some uncertainty surrounding debt repayment. Moreover, considering the longer term, Whirlpool is highly likely to be a winner from the trade conflict, as management views the Trump administration as leveling the playing field that has been tilted against Whirlpool over time.
It’s a curious mix of near-term risk and long-term opportunity, but today, the market focuses on the former.
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends Whirlpool. The Motley Fool has a disclosure policy.
