The maintenance and cleaning products company
is likely finished with cutting its financial forecasts, and better days are on the way, according to analyst Linda Bolton Weiser at DA Davidson.
WD-40 stock (ticker: WDFC) rose 13% Friday to $197.17 after the company posted higher-than-expected earnings late Thursday, saying that inflation wouldn’t eat into its profits this year. The stock is down about 20% year to date, while the
Nasdaq Composite index
has fallen 13%.
The company reported net income of $19.5 million, or $1.41 a share, for its fiscal 2022 second quarter, ended Feb.28. That is compared with $17.2 million, or $1.24 a share, last year. Revenue rose to $130 million from $111.9 million last year. Analysts were looking for $1.01 a share on revenue of $126.8 million, according to FactSet.
Bolton Weiser upgraded her rating on the stock to Neutral from Underperform, increasing her target for the price to $172 from $157.
The company, which uses petroleum-based specialty chemicals to manufacture products such as lubricants and degreasers, said it forecasts full-year revenue of $522 million to $547 million—the same call it made last quarter. Analysts expect full-year revenue of $533.3 million.
WD-40 also said it now expects gross margins to come in between 50% and 51%, compared with the 52% to 54% it projected in the previous quarter.
Although the latest forecast for gross margins is a bit lower than it was, management is now assuming that crude-oil costs will be between $100 and $120 a barrel this time, in preparation for possibly higher prices. This is a good thing, Bolton Weiser said.
“They have now adjusted their earnings guidance to account for an oil rise, and so therefore, there’s likely there’s going to be any more earnings reductions going forward,” Bolton Weiser said. “So, there’s visibility now on when their margins will start improving.” She expects margins to improve “sequentially,” by the company’s fourth-quarter results.
Tigress Financial Intelligence analyst Ivan Feinseth said in a research note Friday that the stock has more value than is currently reflected in the price, and that the recent selloff is a buying opportunity.
Write to Logan Moore at [email protected]