Skip to main content

WD-40 Company In Tight Spot After FQ2 Results 

Friday, April 9, 2021 | Thomas Hughes
WD-40 Company In Tight Spot After FQ2 Results 

Is Now The Time To Buy WD-40 Company?

Shares of WD-40 Company (NASDAQ: WDFC) are down 15% in the wake of the Q2 results opening up a deep discount into a post-pandemic, economic-reopening winner. The move is driven by sentiment and expectations, expectations that weren’t met, despite a great quarter and upside guidance. With growth, improving profitability, dividends, and dividend growth in the future we can’t help but view today’s decline as tomorrow’s profits. What we’re trying to say is that this 12% discount in WDFC stock sure looks like a buying opportunity to us, now it’s time to see if the market agrees with us. 

WD-40 Company Misses Top And Bottom Line Consensus 

The WD-40 Company had a pretty good FQ2 with 11.9% topline growth. The problem is that analysts were expecting closer to 14% making this a miss in terms of the market. Another factor weighing on shares is the positive impact of FX on revenue, an impact worth $2.7 million or about 300 basis points of growth. On a segment basis, the North American market was weakest with -1% growth but that was more than offset by a 19% expansion in the EMEA region and 39% in APAC. In terms of products, maintenance products sales grew 13% while home and cleaning clocked a more tepid 3% gain. 

Moving down the report, the company reports a decrease in gross margins that helped drive a solid bottom-line result. Gross margins are up 80 basis points in the quarter, 200 basis points for the YTD period, and should expand in the second half as supply issues are resolved. On the bottom line, the GAAP $1.24 in earnings missed by $0.07 due to increased ad-spending and promotional expense. 

The mitigating factor for us is that the sales miss will most likely be caught up in the second half of the year. The company says supply constraints, we read shipping and freight issues as well as shortages of primary supplies possibly linked to shipping and freight issues, cut into sales. If not for that the Q2 results would have easily met and exceeded consensus. Turning to the guidance, the company has raised FY guidance to $445 to $475 but this is conservative at best. The company has already earned 50% of the high-end of their revenue range with solid demand and economic acceleration going into an historically strong sales period. 

“the pandemic has also caused some disruptions and constraints to our supply chain, primarily in the Americas, which impacted our ability to meet the increased end user demand we experienced in the United States during the second quarter.  Despite these supply chain challenges in the United States, we continue to experience very strong point-of-sale end user demand for our maintenance products. We are working to address the supply chain challenges and there is a recovery plan underway which we expect will result in improved conditions in the back half of the year,” says CEO and Chairman Gary Ridge. 

The WD-40 Dividend Is Safe And Growing

WD-40 Company pays a safe and growing dividend if only with a 1.0% yield. The company is paying out only 50% of its earnings in dividends right now and that is with the recent 8% increase. The balance sheet is a fortress so there is no worry there, debt is incredibly low, leverage is only 2.5X cash flow, and there is ample free cash flow for a 12th consecutive increase early in 2022. Based on the history, FCF, and earnings outlook we think the next increase will be in the range of 10%. 

The Technical Outlook: The Shorts Are In Control Of WD-40 Company

Shares of WDFC are down 15% in the wake of the release due in part to the miss but also because of high short interest. The combination of lackluster results and high-short interest has the stock down testing support at what could be a strong level and entry point for new money. The caveat is that the bears are still in control, this level may turn into support but it isn’t evident yet. If price action is able to consolidate here and/or make a bounce we’d start getting interested again. If not then this stock may move down toward the $200 level. In either case, we think this stock is going to turn into a strong buy

WD-40 Company In Tight Spot After FQ2 Results 

Featured Article: What is the Shanghai Stock Exchange Composite Index?


7 Precious Metals Stocks That Will Keep Your Portfolio On Trend

The growing acceptance of cryptocurrency is beginning to make mainstream investors rethink their idea of “store of value.” The trendy possibilities of Bitcoin, Ethereum, and any of the dozens of altcoins that exist on the blockchain are trending like the latest fashion.

However, the thing about fashion is that the more things change the more things stay the same. Just like the simple black dress that won’t go out of fashion, the same can be said for precious metals stocks. One way to think about it would be to say that the existence of a growing cryptocurrency market doesn’t change the value of precious metals.

Precious metals have long been known to be a safe-haven asset in times of market volatility and economic crisis. In fact, during the Covid-19 pandemic, gold prices surged about 30% breaking the $2,000 mark for the first time in its history. This was at a time when the prices of many cryptocurrencies were falling.

And precious metals have also been seen as a hedge against inflation, which seems like more of a certainty with the Federal Reserve’s pledge to keep interest rates at historically low rates into 2023.

Whether you’re looking to take your first steps at crafting a precious metals portfolio or if you want to fine-tune the one you have, we believe this special presentation is a good place to start your research. We’ve identified seven precious metals stocks that look to retain their allure in 2021.

View the "7 Precious Metals Stocks That Will Keep Your Portfolio On Trend".


Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
WD-40 (WDFC)1.6$239.77-1.5%1.20%54.49Hold$295.00
Compare These Stocks  Add These Stocks to My Watchlist 

MarketBeat - Stock Market News and Research Tools logo

MarketBeat empowers individual investors to make better trading decisions by providing real-time financial data and objective market analysis. Whether you’re looking for analyst ratings, corporate buybacks, dividends, earnings, economic reports, financials, insider trades, IPOs, SEC filings or stock splits, MarketBeat has the objective information you need to analyze any stock. Learn more about MarketBeat.

MarketBeat is accredited by the Better Business Bureau

© American Consumer News, LLC dba MarketBeat® 2010-2021. All rights reserved.
326 E 8th St #105, Sioux Falls, SD 57103 | U.S. Based Support Team at [email protected] | (844) 978-6257
MarketBeat does not provide personalized financial advice and does not issue recommendations or offers to buy stock or sell any security.

Our Accessibility Statement | Terms of Service | Do Not Sell My Information

© 2021 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided 'as-is' and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see disclaimer. Fundamental company data provided by Zacks Investment Research. As a bonus to opt-ing into our email newsletters, you will also get a free subscription to the Liberty Through Wealth e-newsletter. You can opt out at any time.