WD-40 Runs Past Analyst Predictions in Third Quarter

Andrew Klips |

Shares of WD-40 Company (WDFC) are looking to gap up Tuesday morning, following a better-than-expected earnings report after Monday's closing bell, showing a 12-percent jump in net income that sent shares northbound to all-time highs. The company also hiked its earnings outlook for the fiscal 2013 year.

For the fiscal third quarter ended May 31, San Diego-based WD-40 reported revenue of $93.1 million, up 7 percent from $87.0 million in the year prior quarter. Net income for the recent quarter was $10.3 million, or 66 cents per share, versus $9.1 million, or 57 cents per share in the third quarter last year.

Wall Street was expecting EPS of 56 cents on revenue of $89.0 million.

Sales of multi-purpose maintenance products, which comprise the lion's share of total revenue and include WD-40, 3-In-One and Blue Works brands, rose 12 percent to $82.2 million. That increase more than offset an 18-percent decline in homecare and cleaning products sales to $10.9 million.

By location, segment sales in the Americas improved 8 percent to $47.6 million; Europe sales rose 8 percent to $32.5 million; and Asia-Pacific sales were essentially flat at $13.0 million. The company said it sees growth opportunities in China, but there will be "ups and downs" because of shifting growth patterns, amongst other reasons.

Gross margin increased to 51.3 percent from 49.5 percent last year on price increases, less promotional offers and supply chain adjustments, helping the company hit a target of gross margin over 50 percent.

Selling, general and administrative costs rose 13 percent to $25.7 million, but advertising and sales promotion costs were lower by 1 percent at $6.6 million. Total operating expenses climbed 9.6 percent to $32.83 million.

"We are pleased with our performance across the globe this past fiscal year, and have confidence in our ability to continue to leverage the WD-40 shield and to create solid growth in our core product lines," said Garry Ridge, president and chief executive officer at WD-40.

Looking forward, WD-40 affirmed its fiscal year 2013 revenue in the range of $356.0 million to $370.0 million. Net income is now seen between $37.6 million and $39.0 million, equating to earnings per share between $2.40 and $2.48. Previously, the company said it expected EPS in the range of $2.32 to $2.42.

Analysts were expecting profits of $2.39 per share for the year.

Shares of WDFC closed down by 13 cents at $57.65 during regular trading hours on Monday, but surged after the release and are holding around $66 each in early pre-market activity on Tuesday, representing gains of more than 14 percent. Through Monday's close, shares are up about 23 percent in 2013.

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