Goldman Sachs says this appliance stock is cheap and can jump more than 20%

Published Tue, Apr 11 20235:57 AM EDT

Whirlpool is trading at a discount, and investors should take advantage of it, according to Goldman Sachs. Analyst Susan Maklari upgraded the stock to buy from neutral. Maklari's price target of $160 implies the stock could rally 24% over the next 12 months. "Although the near-term path is likely to remain choppy, we believe the current valuation provides an attractive entry point," she said in a Tuesday note to clients. Whirlpool has lost 8.8% since the start of 2023. It's also down more than 26% over the past 12 months. WHR YTD mountain Whirlpool The company has announced initiatives such as a majority stake divestiture in its unprofitable European operations, the acquisition of high-quality assets in InSinkErator and a cut of $500 million in structural costs. Those initiatives such help the company achieve longer-term revenue, cash flow and return targets, Maklari said. She said channel checks showed promotions have stabilized in North America in March, helping the stabilize pricing despite commodities remaining volatile. Maklari also noted that Goldman Sachs has predicted appliance industry shipments should hit a trough in 2023 after three years of elevated demand, though Whirlpool should outperform the broader sector by about 1% in the year as the company's supply chain issues continue resolving. A challenging economic environment can be somewhat mitigated in the appliance industry given that 50% of more of demand comes from product replacement, she said. That can make the industry more defensive compared with other building product categories. Maklari said operating margin should improve modestly through 2024, helped by deflation in raw materials and sustained list prices increases. Cost takeouts should offset any rise in promotional activitiy or any volume deleveraging seen in 2023, she said. To be sure, she said near-term visibility is limited and execution risk remains. But the analyst noted that's more reflected in valuation. — CNBC's Michael Bloom contributed to this report.