Whirlpool and Stanley Black & Decker: Navigating the US Housing Market Turbulence

In the midst of a fluctuating US housing market, two giants, Whirlpool and Stanley Black & Decker, navigate the choppy waters with strategic cost-cutting measures and a focus on dividends, capturing the attention of investors seeking stability and growth. The recent 14.8% plunge in US housing starts in January, the steepest since April 2020, paints a picture of a sector under the weather—literally and figuratively. This drop, primarily in multifamily construction, alongside a mixed bag of building permit data, signals a complex recovery path for the housing market, deeply intertwined with the fortunes of these industry stalwarts.

The Dip: A Cold Start to the Year

January witnessed housing starts tumbling to 1.33 million units, a stark reflection of the challenges posed by inclement winter conditions. The multifamily sector bore the brunt of this downturn, while single-family starts showed resilience, remaining steady amidst the storm. This period of volatility was further underscored by a decrease in building permits, down to 1,470,000 units, despite a slight uptick in single-family permits. The hardest-hit regions by winter storms saw the most significant declines, presenting a vivid snapshot of the impact of external factors on housing construction momentum.

Signals Amidst the Noise

Despite the immediate setbacks, there are emerging signs of optimism. The National Association of Home Builders (NAHB) reported a surge in sentiment to a six-month high in February, buoyed by declining mortgage rates and a spike in buyer confidence. This optimism is rooted in expectations for improved sales, increased buyer traffic, and stable current sales across all regions. Furthermore, builders are navigating the market with fewer price reductions and incentives, thanks to the easing of mortgage rates. The NAHB's forecast of a 5% increase in single-family starts this year adds a layer of anticipation for a recovery in the housing market.

Whirlpool vs. Stanley Black & Decker: Navigating the Waves

Amidst this backdrop, Whirlpool and Stanley Black & Decker stand as beacons for investors. Both companies, closely tied to the health of the housing market, are embarking on significant cost-cutting journeys. Whirlpool plans to slash costs by $300-$400 million by 2024, sharpening its focus on the North American market. On the other side, Stanley Black & Decker aims for a more ambitious $2 billion in cost reductions by 2025, coupled with efforts to trim inventory levels. These strategic moves come at a time when both companies are grappling with declining sales, yet their attractive dividend yields of 6.3% and 3.6%, respectively, offer a silver lining.

Whirlpool, in particular, stands out with its more appealing valuation and potential for margin improvement, especially after its exit from the European market. Its adept inventory management further positions it as a stronger buy in comparison to Stanley Black & Decker. Despite the near-term risks shadowing the housing market, the resilience and strategic pivots of these companies offer a glimpse into potential recovery and growth, making them noteworthy considerations for investors looking beyond the turbulence.

The journey of the US housing market towards recovery is riddled with challenges and uncertainties. Yet, the strategic maneuvers of Whirlpool and Stanley Black & Decker, against the backdrop of a complex construction landscape, underscore a narrative of resilience and optimism. As the market navigates through the impacts of weather, material and labor shortages, and fluctuating demand, the intertwined destinies of these companies with the broader housing sector will be a tale of strategy, adaptation, and hopefully, triumph.