Hey, do you hear that squeak? No?
Well, what you don't hear is greasemeister WD-40 (NASDAQ:WDFC) sneaking in for its earnings day. The company reports its fiscal Q2 2006 numbers after market close tomorrow.
What analysts say:
- Buy, Sell, or Waffle? Only three analysts follow WD-40, splitting buy/sell two-to-one.
- Revenues. Analysts expect tomorrow's quarterly sales numbers to beat out last year's by 13%. $68.9 million is the target.
- Earnings. Profits, however, are expected to come in flat year over year, at $0.31 per share.
What management says:
In reviewing the company's fiscal Q1 2006 results back in January, WD-40 CEO Garry Ridge highlighted his company's sales growth in lubricants, household products, and hand cleaners, but expressed concern over the firm's rising cost of goods sold and a desire to re-expand its gross margins.
What management does:
The past 18 months have seen WD-40's gross profits squeezed steadily, with gross margins contracting quarter after quarter after quarter. The good news is that the company has held the line pretty well on operating and net margins, with the former only losing about 10 basis points, and the latter actually gaining 40 bp.
|
Margins % |
8/04 |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
|---|---|---|---|---|---|---|
|
Gross |
51.8 |
51.1 |
50.3 |
49.4 |
49.2 |
48.6 |
|
Op. |
18.7 |
18.7 |
17.8 |
17.6 |
18 |
18.6 |
|
Net |
10.6 |
10.7 |
10.2 |
10.1 |
10.6 |
11 |
One Fool says:
To illustrate WD-40's success in controlling costs, consider the numbers from last quarter's earnings release. In fiscal Q1 2006, the company grew its sales by 7.5% -- but its cost of goods sold (COGS) grew at almost twice that rate.
WD-40's solution: Don't just limit the increase in selling, general, and administrative (SG&A) expenses to the rate of sales increase. Instead, reduce SG&A costs to blunt the effect of the higher COGS. So despite its sales rising, WD-40 actually shaved $0.4 million off of its SG&A expenditures that quarter.
Or did it? In reviewing the fiscal Q1 report, fellow Fool Nathan Parmelee argued that WD-40 only postponed some advertising costs in order to reduce SG&A, and that the company's advertising expenditures for the year will be roughly equal to what it spent last year, as a percentage of sales. If that's true, the first quarter turnaround could prove to have been just that: a one-quarter-long deal.
Competitors:
- Church & Dwight (NYSE:CHD)
- Clorox (NYSE:CLX)
Fool contributor Rich Smith does not own shares of any company named above.
