Despite unveiling favorable Q2 (Feb) earnings, WD-40 (WDFC, Financial) experienced a decline in share price today. The company, renowned for its signature WD-40 lubricant, also markets other maintenance products like GT85 and 3-IN-ONE, in addition to a smaller segment of home cleaning products including X-14, 2000 Flushes, Spot Shot, and Carpet Fresh.
Key highlights from the earnings report and strategic announcements include:
- WD-40 announced its intention to sell its US and UK Homecare and Cleaning Products division, aiming to concentrate on its higher-margin maintenance products and spur innovation.
- The company reported a 6% year-over-year decrease in EPS to $1.14, slightly surpassing analyst expectations, with a 6.8% increase in revenue to $139.1 million, aligning with forecasts.
- The successful launch of the first phase of its ERP system in Q2 was highlighted, which, despite potential short-term sales impacts, was offset by strong US demand.
- WD-40 reported sales growth in all trade blocks for the second consecutive quarter, with continued gross margin expansion allowing for increased advertising and promotional spending.
- The company substantially raised its FY24 EPS guidance to $5.00-5.30 from $4.78-5.15, maintaining its full-year revenue growth outlook of +6-12%.
The stock's downturn might puzzle some, given the solid Q2 performance and optimistic guidance. Investors could be reacting to the unchanged revenue outlook despite the EPS boost or the decision to divest the Homecare and Cleaning Products portfolio. However, this strategic move is expected to enhance margins and allow WD-40 to focus more on its core business areas.
