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%.
Company Description
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.
Outlook
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.
Dividend
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%.
Valuation
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
Zacks Investment
Research
and Editor of the
Income Plus Investor service
.
WD 40 CO (
WDFC
): Free Stock Analysis Report
WD 40 CO (
WDFC
): Free Stock Analysis Report
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