Shares of Maytag Corp. and Whirlpool Corp. rose on March 21 after Longbow Research raised its ratings on both U.S. appliance makers, saying more price increases could help 2005 earnings.
David MacGregor, an analyst with U.S.-based Longbow Research, raised Maytag to "neutral" from "sell" and upgraded Whirlpool to "buy" from "neutral." In afternoon trading, Maytag shares were up nearly 5 percent, or U.S. $0.67, at $14.16, while Whirlpool gained 3.6 percent, or $2.31, to $66.26.
In a research note, Longbow said a second round of appliance price increases was likely to be announced in early April in the 5- to 10-percent range, with the increases to take effect in June.
Whirlpool, Maytag, and other appliance makers have raised U.S. prices at least 5 percent this year to offset higher costs of steel, oil and other materials, bucking a trend of declining appliance prices over the past few years.
General Electric Co. and Maytag had no comment on their appliance pricing strategy, while other manufacturers did not immediately return a call seeking comment.
Longbow said it expects Maytag's first-quarter earnings to fall below consensus analyst estimates, with a possible positive profit surprise from restructuring savings.
Maytag, whose brands include Jenn-Air, Amana and Hoover vacuums, has cut staff and is looking to move more output to lower-cost areas to improve earnings.
Longbow said Whirlpool's first-quarter results may be "at risk" given rising production costs. "Our upgrade is based on what we expect to occur beginning in 2Q with earnings power improvements based on price increases," Longbow's note said.
Analysts currently expect first-quarter profit of U.S. $0.19 a share for Maytag, which earned $0.59 in the year-earlier period, according to Reuters estimates.
For Whirlpool, the consensus estimate is $1.11 a share, compared with $1.43 a share earned a year ago. (Reuters)
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