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:
Americas: 51% Europe: 34% Asia-Pacific: 15%
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.
WD 40 CO (WDFC): Free Stock Analysis Report To read this article on Zacks.com click here.
updated Apr 24, 2012
Sign up to get our newsletter with money saving tips, deals and coupons - no spam.
discounts & deals from all banks in one app?
At GET.com we compare credit cards and rate them objectively based on the credit card's features, interest rates and fees.
Cards are rated by our team based primarily on the basis of value for money to the cardholder. The GET.com team rates each card based on its annual fee, rewards, benefits, bonus, introductory APR, ongoing APR, flexibility (in how its benefits can be used and how rewards are earned and redeemed), and other card features.