Estimates have been rising for WD-40 Company (WDFC) after the company beat the Zacks Consensus Estimates on both the top and bottom lines, and management provided 2012 guidance above consensus.
It is a Zacks #2 Rank (Buy).
In addition, WD-40 Company has a solid balance sheet and strong cash flow, which has allowed it to pay a dividend that yields a solid 2.7%.
WD-40 Company is a consumer products company with sales from around the globe. The company generates most of its income from its iconic WD-40 brand, but over 15% of its revenue comes from its homecare and cleaning brands, like X-14, Carpet Fresh and Spot Shot.
Revenue by geographic region over the last 6 months was divided as follows:
The company was founded in 1953 and is headquartered in San Diego, California. It has a market cap of $699 million.
Second Quarter Results
WD-40 Company delivered better than expected second quarter results on April 5. Earnings per share came in at 65 cents, beating the Zacks Consensus Estimate by 11 cents. It was a 23% increase over the same quarter last year.
Sales were up 9% to $86.0 million, ahead of the Zacks Consensus Estimate of $85.0 million. This was driven by a 9% increase in multi-purpose maintenance products and a 6% increase in homecare and cleaning products.
The gross margin was impacted by the rising cost of oil-based materials and aerosol cans. But this was partially offset by rising selling prices. And selling, general and administrative expenses fell from 27.3% to 25.5% of sales.
Meanwhile, operating income rose 6% year-over-year.
Following solid second quarter results, management provided encouraging guidance for the remainder of the year. It expects to earn between $2.33 and $2.45 per share (which was above consensus at the time) on sales of $353-$370 million.
This prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).
The Zacks Consensus Estimate for 2012 is now $2.37, within guidance, and representing 11% growth over 2011 EPS. The 2013 consensus estimate is currently $2.56, corresponding with 8% growth.
WD-40 Company has a solid balance sheet and generates strong cash flow, which has allowed it to pay a dividend that yields a solid 2.7%.
Since 2003, it has increased its dividend 4 times at a compound annual rate of 4%.
The valuation picture looks reasonable. Shares trade at 18x 12-month forward earnings, essentially in-line with its 10-year historical median.
Its price to cash flow ratio of 18x is also in-line with its historical multiple.
The Bottom Line
With rising estimates, strong growth projections, a 2.7% yield and reasonable valuation, WD-40 Company offers a lot to like.
Todd Bunton is the Growth & Income Stock Strategist for and Editor of the Income Plus Investor service.