Zep Earnings Preview

Zep (NYSE: ZEP  ) didn't hit the Street's expectations last quarter, but investors hope it will rebound this quarter. The company will unveil its latest earnings on Monday. Zep produces, markets, and services a range of cleaning and maintenance solutions.

What analysts say:

  • Buy, sell, or hold?: Half of analysts think investors should stand pat on Zep while the remaining half rate the stock as a buy. Analysts like Zep better than competitor Clorox overall. Zero out of 15 analysts rate Clorox a buy compared to two of four for Zep. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared to three months ago.
  • Revenue forecasts: On average, analysts predict $155.7 million in revenue this quarter. That would represent a decline of 1.1% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.16 per share. Estimates range from $0.15 to $0.18.

What our community says:
CAPS All-Stars are solidly behind the stock with 87.5% awarding it an outperform rating. The community at large backs the All-Stars with 90% assigning it a rating of outperform. Fools are bullish on Zep, though the message boards have been quiet lately with only 24 posts in the past 30 days. Zep has a bullish CAPS rating of five out of five stars that is about on par with the Fool community assessment.

Management:
Zep's profit has risen year over year by an average of 73.6% over the past five quarters. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 3.4 percentage points in the last quarter. Revenue rose 7.7% while cost of sales rose 14.7% to $95.9 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q4

Q3

Q2

Q1

Gross Margin

44.8%

46.7%

46.7%

49.6%

Operating Margin

4.2%

6.9%

3.2%

6.1%

Net Margin

2.3%

3.7%

1.5%

3.1%

For all our Zep-specific analysis, including earnings and beyond, add Zep to My Watchlist.

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Earnings estimates provided by Zacks

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