WD-40 (NASDAQ:WDFC) Misses Q1 Sales Targets
Stock Story
Published Apr 09, 2024 04:14PM ET
Updated Apr 09, 2024 04:30PM ET
WD-40 (NASDAQ:WDFC) Misses Q1 Sales Targets
Household products company WD-40 (NASDAQGS:WDFC) fell short of analysts' expectations in Q1 CY2024, with revenue up 6.8% year on year to $139.1 million. On the other hand, the company's full-year revenue guidance of $585 million at the midpoint came in 1.2% above analysts' estimates. It made a GAAP profit of $1.14 per share, down from its profit of $1.21 per share in the same quarter last year.
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WD-40 (WDFC) Q1 CY2024 Highlights:
- Revenue: $139.1 million vs analyst estimates of $140.3 million (0.8% miss)
- EPS: $1.14 vs analyst estimates of $1.13 (small beat)
- The company reconfirmed its revenue guidance for the full year of $585 million at the midpoint
- Gross Margin (GAAP): 52.4%, up from 50.8% in the same quarter last year
- Free Cash Flow of $16.67 million, down 36.2% from the previous quarter
- Market Capitalization: $3.51 billion
Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQGS:WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.
Household ProductsHousehold products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.
Sales GrowthWD-40 is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
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As you can see below, the company's annualized revenue growth rate of 8% over the last three years was decent for a consumer staples business.
This quarter, WD-40's revenue grew 6.8% year on year to $139.1 million, missing Wall Street's estimates.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
WD-40's free cash flow came in at $16.67 million in Q1, up 98.5% year on year. This result represents a 12% margin.
Over the last two years, WD-40 has shown strong cash profitability, giving it an edge over its competitors and the option to reinvest or return capital to investors while keeping cash on hand for emergencies. The company's free cash flow margin has averaged 12%, quite impressive for a consumer staples business. Furthermore, its margin has averaged year-on-year increases of 18.6 percentage points over the last 12 months. Shareholders should be excited as this will certainly help WD-40 achieve its strategic long-term plans.
Key Takeaways from WD-40's Q1 Results It was good to see WD-40's full-year revenue forecast beat analysts' expectations. We were also happy its gross margin narrowly outperformed Wall Street's estimates. On the other hand, this quarter's revenue and operating margin unfortunately missed. Furthermore, even though it raised its full-year EPS guidance, that forecast missed analysts' estimates as well.
During the quarter, the company announced the acquisition of a Brazilian marketing distributor. Today, it also announced its intentions to divest its U.S. and U.K. Homecare and Cleaning Products segments. WD-40's goal with these strategic moves is to focus on its core, higher-margin maintenance products.
Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The market was likely expecting more, and the stock is down 4% after reporting, trading at $245 per share.
Written By: Stock Story
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