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The Small Company That Could Steal Alcoa's Thunder Monday

Investors have been looking forward to next Monday, when Alcoa will play its traditional role in leading off the thousands of companies that will release their second-quarter earnings results in the coming weeks. But rather than focusing on the struggling aluminum giant, investors might do better to look at a much smaller company that has done a better job lately of giving shareholders the long-term returns they want.

WD-40 (NASDAQ: WDFC  ) is well-known for its namesake lubricant, which has a place in many garages around the nation. Yet despite its name, the company offers more than just WD-40, with other products including Lava, Carpet Fresh, and 2000 Flushes helping it fill out its roster of consumer offerings. Let's take an early look at what's been happening with WD-40 over the past quarter and what we're likely to see in its report on Monday.

Stats on WD-40

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$89.45 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will WD-40's earnings grow more smoothly this quarter?
Analysts have kept their views on WD-40's earnings largely unchanged in the past three months, with no movement in consensus figures for the May quarter or future periods. The stock, though, has done quite well, rising almost 9% since early April.

WD-40 started things off right with a favorable earnings report for its February quarter. Although the company's net income dropped slightly on an absolute basis, a reduction in the number of outstanding shares led to modest earnings-per-share growth of about 1.5%. That was enough to beat estimates by a dime per share, and the company boosted its guidance for the remainder of the fiscal year as well.

What WD-40 has recognized, though, is that its biggest strength is its namesake brand. Dominant consumer giants Procter & Gamble (NYSE: PG  ) and Kimberly-Clark (NYSE: KMB  ) have much greater leverage with retailers in getting prime shelf space for their respective cleaning offerings, with a full array of popular high-selling items that gives the two consumer giants a better bargaining position for high-demand items than WD-40 will ever get. That's why WD-40 has de-emphasized sales of low-margin products like 2000 Flushes and Carpet Fresh, and revenue has plunged in those segments as a result, with sales down 54% and 30% for those two products, respectively, in the most-recent quarter.

Instead, WD-40 has come out with new items bearing the WD-40 name, including its WD-40 Bike product for chain and component maintenance. The company benefited from an invitation to the UCI Cyclocross World Championships in January, and that has led to greater awareness of the WD-40 Bike brand. Moreover, the company has looked to boost its WD-40 Specialty category, with products targeting motorcycles and lawn-and-landscape care in the pipeline.

In WD-40's earnings report, watch for signs of how the company's broader strategic plan is proceeding. By making the most of its strengths, WD-40 could well position itself for much greater growth than you'll see from Alcoa on Monday.

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Related Tickers

9/26/2016 4:00 PM
WDFC $116.05 Down -0.65 -0.56%
WD-40 CAPS Rating: ***
KMB $125.51 Down -1.22 -0.96%
Kimberly-Clark CAPS Rating: ****
PG $87.85 Up +0.09 +0.10%
Procter and Gamble CAPS Rating: ****