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Tickers in this Article: WHR, PHG, GE, ELUXF, SHLD
Remember how successful last year's "Cash For Clunkers" program was at boosting sales of autos in the U.S.? Well, it now looks a similar program aimed at boosting consumer purchases of new, more energy-efficient home appliances like washers, dryers and fridges also generated a better than expected response from consumers. IN PICTURES: Digging Out Of Debt In 8 Steps

Stimulus Plan a Success
Beginning late last year, Congress authorized $300 million in federal rebates towards the purchase of big ticket home items as part of the economic stimulus package. Rebates of as much as $200 were available on those products carrying the "Energy Star" label. The program was seen as a way of kick-starting a recovery in sales for major appliance makers like Whirlpool (NYSE:WHR), Electrolux (OTC: ELUXF) and General Electric (NYSE:GE), all of which saw their sales evaporate as consumers reigned in big ticket purchases during the recession. Now, that the first quarter numbers are coming in for the major appliance producers, it's clear that this relatively modest stimulus plan has paid off handsomely.

Appliance Maker Profits Rise Sharply
Whirlpool shares recently soared more than 16% as its first-quarter profit more than doubled from the same period a year ago and handily beat analysts' profit forecasts. The company now expects this year's earnings per share to come in between $8.00 to $8.50 compared to analysts' earlier estimates of slightly under $7 per share in earnings.

Similar improvements in profitability have also been reported by the world's number two appliance maker, Electrolux, which recently reported first quarter EBIT that was 30% ahead of expectations. And major appliance retailer, Sears (NASDAQ:SHLD) has been dropping broad hints that its first quarter numbers are also likely to beat expectations. Sears shares soared more than 8% following the release of this upbeat guidance, although some of those gains have been lost in recent trading.

Economy on the Mend
While stimulus-driven purchases are no doubt responsible for a good deal of the surprise rise in profits, there are also plenty of signs to suggests that the resumption in demand may be more than a temporary response to a government incentive program. U.S. home sales recently shot up to an eight-month high suggesting that the U.S. economy is now clearly on the path to recovery. And these more optimistic homebuyers have also been spending their money on other household items that have no connection to any stimulus programs. The recent dramatic profit turnaround by consumer electronics giant Philips (NYSE:PHG) was driven largely by a recovery in its North American consumer lifestyle business.

The Bottom Line
Whirlwind is unlikely to match the pace of first-quarter earnings gains over the balance of the year because the bulk of the stimulus funds are likely to have been used up at this point. However, the continuing improvement in the economy should be enough of a tailwind to keep Whirlpool's earnings growth on track for the balance of the year, and possibly ahead of expectations. (Some think that the US government is too big to fail, but one must only look at historical examples to know that it's not true. For more information, check out Is The U.S. Government Too Big To Fail?)

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