Electrolux Can Do Better From Here

At first glance, there's a lot not to like about Electrolux (OTCPK:ELUXY). While this international appliance maker is competitive with companies like Whirlpool (NYSE:WHR), BSH Hausgeräte and GE's (NYSE:GE) former appliance business in terms of market share, the company's margins have been underwhelming and the company has also seen lackluster (or worse) performance in businesses like small appliances and markets like Brazil in recent years. Worse still, a transaction with GE that was supposed to significantly increase its North American business, improve its product breadth and drive margin synergies was turfed on anti-trust concerns (with Haier (OTCPK:HRELY) benefiting).

And yet, I think there are solid reasons to consider these shares. I don't think Electrolux can get to Whirlpool's double-digit North American margins, but it doesn't have to; just a couple of points of margin improvement overall would make a difference. What's more, the company has a clean balance sheet and a lot of M&A options in both its core appliance and professional equipment businesses. If I'm right about Electrolux being able to generate a 6% to 8% EBITDA and FCF growth on the back of okay top-line demand, a slow recovery in Brazil and better operating margins, 10% to 15% undervaluation seems reasonable, with a decent dividend as a bonus.

Electrolux's ADRs aren't always as liquid as an investor might want, so readers may want to consider the shares listed in Sweden as a more liquid option.

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Electrolux Can Do Better From Here

Seeking Alpha: Techtronic Still Worth A Look As A Housing Recovery Play

My Top Idea call on August 20, 2013 to buy Techtronic (OTCPK:TTNDY) worked okay for a while, as the stock rose almost 20% through to year-end. Shortly thereafter, worries about the soundness of the housing play as an investing them started to creep into the market, stimulated by weaker housing starts and existing sales and worries about the economy as a whole. That took a lot of the steam out of Techtronic, as well as rival Stanley Black & Decker (SWK) and major retailing partner Home Depot (HD).

I believe the Techtronic story remains an appealing one. Techtronic has been a share-gainer in the U.S. with its Ryobi and Milwaukee tool lines, and still has yet to really address the European or major emerging markets in a big way. Likewise, I continue to believe that the company can do better with its floor care business, with a resulting uplift to margins. With margins and returns on capital heading in the right direction and a housing market only in the early phases of recovery, I still believe Techtronic has a lot to offer at these levels.

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Techtronic Still Worth A Look As A Housing Recovery Play

Investopedia: Lowe's Had Better Start Improving

It seems like a fuzzy memory now, but Lowe's (NYSE:LOW) was once seen as the superior operator to Home Depot (NYSE:HD) on the big-box home improvement battleground. Times have definitely changed, though, as Home Depot has gained an edge not only with its store locations (more stores in or near urban centers), but also with its merchandising. Making matters worse, Home Depot has significantly closed the gap (if not leapfrogged) Lowe's in an area where Lowe's once dominated – back-office logistics and cost management.

Even if Home Depot has been operationally de-pantsing Lowe's recently, it doesn't show up in the stocks over the last year – they both have nearly equal 60%-plus gains to their credit. Look at the two-year, five-year, or 10-year comparisons, though, and you see a wide gap between the performance of Home Depot and Lowe's (in favor of Home Depot). While there is a lot that Lowe's could do to close the gap and be a relative out-performer, the real question has to be “will they?”

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Investopedia: Whirlpool Not Just Another Doomed U.S. Manufacturer

I've been curious about U.S. home appliance manufacturer Whirlpool (NYSE:WHR) for some time now; unfortunately standing on the sidelines while the stock soared immediately after the fourth quarter earnings. Although this company does have legitimately worrisome issues with margins, free cash flow conversion and foreign competition, skeptics may find that there's quite a bit more here than they assume.

Fourth Quarter Results Lukewarm  
Whirlpool had something of a good news/bad news release for the fourth quarter. Reported revenue fell 3% (or 2% in constant currency terms) and that wasn't great. Although North America eeked out a 1% sales gain, results were weaker than expected in Latin America and Europe (down 1 and 7%, respectively, in constant currency). Curiously, shipments were remarkably consistent across Whirlpool's major segments - down 3% in North America and 4% in both Europe and Latin America.

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http://stocks.investopedia.com/stock-analysis/2012/Whirlpool-Not-Just-Another-Doomed-U.S.-Manufacturer-WHR-GE-SHLD-LOW0206.aspx

Investopedia: Waiting To Warm Up To Middleby

Foodservice equipment manufacturer Middleby (Nasdaq:MIDD) is following a time-tested strategy - bring innovation and consolidation to a fragmented and, in some ways, stagnant industry. At the same time, certain realities still apply to the company and the stock. Foremost among them is the fact that the capital equipment market for the foodservice industry is still challenging, and Middleby still competes against well-known and well-heeled competitors. 


First Quarter Results Look Warm, Not Hot 
Middleby's first quarter was not necessarily bad, but institutional investors will likely focus on the company's shortfall in revenue. While the company did report revenue growth of nearly 14%, the company still came in below the lowest published analyst estimate. Organic sales were up more than 7% for the period, with the commercial foodservice unit up nearly 9% and the more volatile food processing unit down about 3%.

Even if revenue was disappointing, the company did well on margins. Gross margin was nearly flat, though the company did mention pressures from higher material costs. Operating income rose 19%, and the company saw about 80 basis points of margin expansion, as flat general/administrative expenses helped offset higher sales expenses.


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http://stocks.investopedia.com/stock-analysis/2011/Waiting-To-Warm-Up-To-Middleby-MIDD-MTW-ITW-DOV-MCD-CMG0516.aspx

Whirlpool Whirring

Solid results this morning from appliance-maker Whirlpool (NYSE: WHR).

Overall revenue was up almost 9% to $4.5 billion, slightly beating the average guess on Wall Street. Adjusted  earnings, though, came in at $3.09, well ahead of the guess of $2.17 a share, and the company bumped its full-year guidance by $1, or about 12%.

There was good and bad here.

Good:
- Sales to Asia up 43%; sales to Latin America up 24%; unit shipments to Brazil look to be up about 10% this year
- North American sales up 6% and the company pushed guidance to the high end of its prior range.
- Internal profitability and cash flow generation is improving significantly

Not-so-good:
- Sales to Europe were down 6%; consistent with Electrolux, but not good news
- Minimal overall revenue upside guidance (the company is doing well on profits, but overall demand is iffy in North America and weak in Europe).

I find it interesting that Whirlpool is widely under-covered; most of the major brokers do not cover them. That could mean that the company is still slightly below the radar of some institutions. I mean, after all, this is an American manufacturing company and American manufacturing is supposed to be doomed, right?

I like the company's overseas prospects; it is a given to me that Brazil, India, and China are going to continue to develop, and their growing middle classes are going to want the sorts of things that Whirlpool makes. Surely there will be competition (China's Haier is already a major competitor), but Whirlpool can be fourth or fifth in China in ten years and still be doing alright.

I need to do a more robust analysis on this stock. I like the long-term thesis, the valuation seems interesting at first blush, the company is serious about internal efficiency, and the company is doing okay in a pretty tough time for its two largest markets (North America and Europe). All that is at least worth a closer look.