Stocks in the news
Whirlpool shares are up 4% today after Goldman Sachs upgraded them from "Neutral" to "Buy". This is the first analyst rating in 2023 and the first upgrade since October 2021. Analysts have not been too warm to Whirlpool due to the state of the housing market, which the household appliance maker heavily depends on. However, homebuilders like KB Home and Lennar are starting to signal a bottoming out in the housing market. Shares have continually found support around $125 over the past six months. Whirlpool's turnaround will rely most on improving conditions in North America, given this region comprises around 60% of its global appliance business. Reducing complexity will also be a vital component of Whirlpool's potential turnaround, and divesting its EMEA operations earlier this year was a significant part of this strategy.
ADTRAN has lowered its Q1 revenue guidance to $322-326 million from $355-375 million due to customer inventory corrections and supply chain issues. This supplier of communications platforms, software, and services for the broadband access market cited customer inventory corrections as the primary cause for the lowered outlook. ADTRAN expects non-GAAP operating margin to be between -1% and -2.5% vs prior guidance of 5.0-6.5%. ADTRAN did not guide for Q1 EPS but a negative operating margin suggests a loss appears likely. Unfortunately, ADTRAN expects this over-supply condition in CPE products will continue into Q2.
CarMax's shares have jumped after posting a surprise profit in Q4 (Feb) after two-straight quarters of double-digit earnings misses. Although CarMax fell short of sales estimates, it has prioritized per-unit margins over volume sales by keeping prices relatively high, clipping vehicle unit sales and driving market share loss. KMX has targeted similar capital expenditure levels yr/yr in FY24 and reiterated its long-term financial goals. The sequential improvements reflect KMX's commitment to its margin management strategies, which have acted as a double-edged sword regarding market share. As a result of its farsightedness, KMX was confident in reiterating its long-term financial targets updated last year.
Micron's shares are piling on the gains today after Samsung announced production cuts over the weekend. Samsung's decision should assist in confirming that the worst of the excessive inventory issue is now behind MU. Peers Western Digital (WDC +9%) and Seagate Tech (STX +2%), both of which have struggled with excessive customer inventories and unfavorable demand conditions over the past year, are receiving a nice boost today.
Taiwan Semi (TSM) is guiding Q1 revenue below analyst expectations. As the world's largest contract chipmaker, TSM serves a broad range of end-market applications with the vast majority of revenue from high performance computing (41% of 2022 revs), smartphones (39%), IoT (9%), automotive (5%), and consumer electronics (3%). TSM did warn on its Q4 call in January that it was observing softness entering 2023 in consumer end market demand. Data center-related verticals were softening as well. TSM explained that customers were likely focusing on working down existing inventory before buying new product. As such, TSM predicted that semiconductor supply chain inventory would be reduced sharply through 1H23 to rebalance to a healthier level. Overall, the guidance was a bit of a letdown, although not entirely surprising given TSM's prior cautious comments. Investors need to remember that TSM is coming off a big year in 2022 with revenue jumping 33.5% in US dollars, fueled by a surge in HPC revenue (+59%) as well as strong growth in smartphones (+28%) and IoT (+47%). As such, some pullback should be expected.