WD-40 (NASDAQ: WDFC) reported earnings for the first quarter on Wednesday after the bell, and even though the consumer-products company went beyond what Wall Street was expecting of it, the stock was traded down nonetheless. Of course, it was a pretty bad day on Wednesday for the markets anyway, so some of it was due to that, I suppose. But the major element bringing WD-40 down was its oily outlook.
WD-40 beat the analysts by five cents with a bottom line equal to $0.46 per share. That's a great performance, but management reduced its guidance for the fiscal year. Previously, WD-40 thought it would do somewhere between $1.65 and $1.85 per share for 2009. Now, the range is between $1.60 and $1.75 per share. The market wasn't heartened by that news. Shares of WD-40 declined by over 2% this morning. And that was on top of a 4% decline Wendesday (again, though, it was a down day on Wall Street overall).
Another negative to the story is that the gross margin went down. Costs, as well as the economy, are making things difficult. In fact, the press release indicates that management isn't too sure how well it will do on a long-term basis at this point. And, in my opinion, if you read between the lines, you come away with the feeling that guidance could be lowered again at some future period. Which isn't good. So even though WD-40 grew earnings per share by 28% and delivered a decent cash-flow statement, I can't say I'm in the mood right now to buy the stock for a trade.
Of course, if you've got a long-term perspective, WD-40 might be cheap. It's near a 52-week low as of this writing and sports a cool dividend yield. For my money, though, I'd rather go with a chip that's a bit bluer, say a Procter & Gamble (NYSE: PG) or a Clorox (NYSE: CLX), in this environment. I'd definitely feel more comfortable with P&G than WD-40.
Disclosure: I don't own any company mentioned, but positions can change at any time.
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