WD-40 (NASDAQ: WDFC), whose consumer-product colleagues include Procter & Gamble (NYSE: PG) and Clorox (NYSE: CLX), issued its second-quarter report on Wednesday after the market closed. The numbers were a bit rusty (yes, the bad pun was on purpose!).
First, we have a big net-sales drop of over 20%. Then, we have a 50% decline in net income, with earnings coming in at 25 cents per share. And finally, we see that the 25-cent per-share number missed estimates by two pennies according to this source. Management blamed the bad results in part on the weak global economy and on currency translations.
Yep, things are bad out there, but I'll give WD-40 credit on a couple fronts. I see that the gross margin increased. That's pretty cool. Last time I reported on the company, the gross margin had declined.
The other positive element I read in the release centered on the statement of cash flows. Looks like some beneficial changes in working capital helped to drive a big increase in cash from operations for the six-month period.
The company generated $11.7 million this year compared to $4.7 million in the similar period last year. That figure was enough to cover capital spending and dividends. Last year, operational cash flow did not cover those two items. Dividend investors love to see a nice, healthy flow of cash.
Shares of WD-40 plunged well over 9% in the after-hours session. At the time of this writing, WD-40 is in the green over the one-month frame. It's up something like 15%. But with this earnings miss and concerns about currency translations, I'm not sure you can make a case that the stock should be bought at these levels.
It does have a good dividend yield, and the stock isn't terribly expensive. Nevertheless, a margin of safety probably would be advisable here. And, as always, I have to say that Procter & Gamble is the consumer-oriented company that I generally favor over most others in the space.
Disclosure: I don't own any company mentioned; positions can change without notice.
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