Electrolux shares pop as North American market drives strong operating profit in Q2

Electrolux reported a significantly larger-than-expected profit for the second quarter, with signs of improvement in its North American business boosting its shares on Friday.

The company’s shares popped more than 6% in European trading.

Despite strong earnings, the Swedish appliance maker reduced its annual cost savings forecast to 4 billion crowns ($375 million) from the previous 4-5 billion crowns, mainly due to increased marketing expenses and higher freight costs, reflecting the broader impact of disruptions to trade in the Red Sea on global companies.

Moreover, Electrolux downgraded its market demand outlook for Europe and Asia-Pacific to “negative” from “neutral” due to persistent high inflation, which continues to dampen spending on big-ticket items.

The company reported an operating profit of 419 million crowns in the second quarter, roughly 450% higher than the company-compiled consensus estimates, driven by strength in North America and Latin America. This figure marks a significant turnaround from a loss of 124 million crowns the previous year and well above the 94 million expected by analysts polled by LSEG.

“The narrowing of losses in North America, a source of pain recently, should be seen as encouraging, but comments on Europe will be closely watched on the call given the importance of the region,” Citi analysts commented.

“While the beat is large in % terms, this reflects the currently low level of profit, but we nonetheless expect an initial positive reaction to the shares today.”

Electrolux’s North American division has struggled with high costs, intense competition from Whirlpool (NYSE:), and slow progress at its new Springfield cooking factory.

Nevertheless, the company achieved a 4.7% increase in quarterly organic sales in the region, driven by higher volumes, despite operating losses increasing to 361 million crowns from 160 million crowns a year earlier.