WD-40 Stock Sank After Earnings—Here Are 5 Reasons Bulls Aren’t Worried

Key Points

• WD-40 is trading near long-term lows, setting for a rebound that can deliver a high-double-digit total return within years.
• Q1 softness is tied to distributor order timing, not end-market weakness, and long-term forecasts were reaffirmed.
• Capital returns underpin the outlook, including the dividend and share buybacks.

WD-40’s NASDAQ: WDFC fiscal Q1 2026 earnings report provided a reason for its market to sell off.

The move, however, opened a buying opportunity that total return investors often dream about.

Although the stock is down significantly from its high, it continues to trade in line with long-term trends, suggesting robust upside potential and a healthy dividend.

Despite the Q1 earnings report coming in below analyst expectations, WD-40’s long-term setup remains intact—and five fundamentals explain why the sell-off may be an opportunity.

1. Revenue Growth Is Still Intact

The WD-40 report failed to spark a rally because its growth fell short of expectations.

At $154.4 million, the top line grew less than 1% and was driven entirely by FX conversion. Revenue fell by more than 2% on an FX-neutral basis, but the internal details are far more promising. The critical detail is that growth is present; the mitigating factors offsetting the weakness include the timing of distributor-related orders and the strength of direct market sales. Direct market sales increased by a robust 8%, underpinned by growth in the Americas and EIMEA regions as well as the Specialty products segment.

Looking forward, the company expects indirect-market softness to normalize as the year progresses.

2. Gross Margin Expansion Signals Operating Leverage

Timing-related softness appears to be the primary driver of the disappointing earnings report, but profitability improved anyway.

Gross margin, the critical indicator, widened by 140 basis points, setting the company up for earnings strength as revenue leverage resumes. Additionally, the 10% increase in SG&A is linked to non-recurring charges that had little impact on the cash flow. The free cash flow margin was maintained at 17.5%, enabling capital returns, including dividends and share repurchases, to continue unabated. 

3. WD-40 Reaffirms Fiscal 2026 Guidance and Long-Term Outlook

Weak as the Q1 results were, the company reaffirmed its full-year guidance, indicating expectations for results to fall at the high end of the range.

As it stands, the company forecasts revenue to grow by 5% to 9% in fiscal 2026, operating income by 5% to 12%, and earnings to follow suit. 

Longer-term forecasts are even more robust.

The company states that it has reached only 25% saturation of its target market and can potentially quadruple in size over time.

With this in mind, the 34x price-multiple at which the stock trades in early 2026 isn’t as high as it may seem. In this scenario, the company trades at only 10x its potential, suggesting a deep value.

4. Dividend Growth and Buybacks Support Total Returns 

The WDFC capital return, including dividends and share buybacks, is healthy, underpinning the stock price valuation and long-term price trajectory.

The dividend, which yields slightly more than 2% with the stock trading near long-term lows, is approximately 60% of the earnings forecast and has been increased annually for 17 years. 

The latest increase was over 8%, and future increases are expected to track earnings growth.

The company bought back more than $20 million in shares in fiscal 2025 and plans to accelerate activity in 2026.

The Q1 repurchases align with that forecast, topping $7.5 million, reducing the count incrementally compared to the prior year. 

6. Institutional Ownership Provides a Stock Price Backstop

Institutions, the driving force for most stocks, like this one. They own more than 90% of it and reverted to buying in the back half of 2025 after selling in the front. Their shift aligns with the market bottom, suggesting a floor is in place that will hold in early 2026.

The primary risk is that price action will retreat to the long-term moving average near $175, but lower lows are unexpected. The likely outcome is that this stock will continue to bottom at and near early January levels before regaining traction later this year.