What happened
Specialty materials company WD-40 (WDFC 0.14%) had been stuck in a rut, reporting two consecutive quarters with no growth. But that all changed this week when the company easily topped quarterly expectations and reaffirmed its full-year guidance. Shares of WD-40 jumped on the earnings announcement Monday and sustained those gains in the days that followed, with the company up 18% for the week on Thursday afternoon, according to data provided by S&P Global Market Intelligence.
So what
WD-40 is best known for the industrial lubricant that shares the corporate name, but the company also makes a range of other products, including cleaning supplies. The company has a long track record, but has lacked momentum in recent quarters.
That all changed this week, when WD-40 reported earnings of $1.38 per share on revenue of $141.7 million for its fiscal third quarter ending May 31. The earnings number beat estimates by $0.16 per share, and revenue was up 14.6% year-over-year and beat estimates. The company also affirmed its full-year guidance for earnings between $4.80 and $5 per share on revenue of $535 million to $600 million, implying some upside to the $4.90 per share on revenue of $535.1 million estimate.
The results were even more impressive when currency conversion issues are considered. On a constant-currency basis, global sales were up 18% in the third quarter and up 7% year to date.
"I am happy to share with you that after two quarters of flat-to-down sales, we have returned to solid top line growth in the third fiscal quarter," CEO Steve Brass said in a statement. "We target a compound annual growth rate for maintenance product revenue in the mid-to-high single digits on a constant currency basis. Achieving year to date growth of 7 percent in constant currency is in-line with our long-term objectives."
Now what
WD-40 has made a habit of distributing cash to shareholders, with the stock currently paying a dividend yield of about 1.5%. Nearly 60% of cash generated by operating activities in the first nine months of the fiscal year has gone to dividends, limiting the company's ability to hike the dividend further, absent growth.
The hope for WD-40 from here is that growth can materialize through a greater focus on international sales and using technology to improve its products and boost margins. There is promise there, but it will take time and the stock reaction is likely to be slow even if it does happen.
WD-40 is unlikely to have many weeks as good as this one.
`
