WD-40 (NASDAQ:WDFC) is one well-oiled business machine. The ever-popular flagship WD-40 lubricant, developed in the 1950s on the 40th attempt (hence the name, Water Displacement, 40th try) continues to contribute the lion's share of results, and consumers continue to find new uses for the product -- more than 2,000 and counting so far. But the company has wisely been diversifying in recent years, emphasizing the development of new, innovative products. So, let's get a grip (if we can) on how this quarter is shaping up.

Wall Street interest (yawn):
The level of interest in this small-cap wonder is pretty low, with only four analysts covering this one. The ones who do cover it are generally lukewarm on its current valuation; most of their ratings come in at a hold. They're calling for only 10% revenue growth this quarter, while earnings are expected to come in at 38 cents a share, roughly flat with last year's numbers.

Management comments on recent trends
WD-40 CEO Garry Ridge has been staying on top of this slippery ball of a company since 1997. Back then, he described it as a "Johnny One-Note" company because it derived all of its revenues from WD-40 lubricant. Ridge has been focused on expanding the product lines away from WD-40, not only to increase sales, but also to change the company's image from a straight marketing company to an innovation marketing and distribution company. With that in mind, new products such as the WD-40 No-Mess Pen and the Big Blast can are definitely nice evolutionary products that are boosting sales, both domestically and internationally. Indeed, last quarter's results included a 15% bump over the previous year from sales in Europe, and household products were up 27%, which include the 2000 Flushes and Carpet Fresh product lines.

Given that WD-40 is a chemical-based company, the rising price of oil affects every part of its operations, from the raw makeup of the product, to transportation, to the cost of the plastic or metal cans. To that end, Ridge said the company will institute price increases during the third quarter to help offset its costs. The company absorbed a $7 million hit to gross margins last year because of oil costs; that sum would have boosted earnings per share by $0.27.

Management results:
Product expansion has been notable, and the company's sales have nearly doubled since Ridge took over as CEO. What's more, WD-40's "Team Tomorrow" crew has been created with the goal of generating $100 million in sales from products developed and launched in the past three years. It's on the right track, having propelled this group of products up to $35 million in sales up from zero in 2002. Internationally, overall results have been good, too; European sales are up 51% over the past two years. That looks like a solid expansion in the works to me.

What this Fool thinks:
This company appeals to me. As a recent new homeowner, I have been finding out just how handy WD-40 is on a daily basis. Management seems to be focused on doing the right things, including growing product lines geographically and strategically, as well as expanding delivery systems for its WD-40 product. My ears are pricked up for news on how Team Tomorrow is doing, as well as how the company is further handling the increases in oil prices. Retailers such as Home Depot (NYSE:HD), and Lowe's (NYSE:LOW) have always resisted price increases, and given that WD-40 is a pretty lean operation with only 244 employees, profit margins are being exposed. Stay tuned for the post-earnings rundown from me tomorrow.

Related consumer staples:

  • Colgate-Palmolive (NYSE:CL)
  • Procter & Gamble (NYSE:PG)
  • Coca-Cola (NYSE:KO)

Home Depot, Colgate-Palmolive, and Coca-Cola are Motley Fool Inside Value recommendations. To get the scoop on the market's best undervalued stocks, try out Inside Value free for 30 days.

Fool contributor Stephen Ellis does not own shares in any companies named above. You can view his holdings here .