Household products company WD-40 (NASDAQ:WDFC) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 5% year on year to $146.1 million. The company’s full-year revenue guidance of $615 million at the midpoint came in 1.9% below analysts’ estimates. Its GAAP profit of $2.19 per share was 54.2% above analysts’ consensus estimates.
"We delivered another strong quarter with net sales growth driven by robust performance in both the Americas and EIMEA regions," said Steve Brass, WD-40 Company's president and chief executive officer.
Company Overview
Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQ:WDFC) is a renowned American consumer goods company known for its iconic and versatile spray, WD-40 Multi-Use Product.
Household Products
Household products stocks are generally stable investments, as many of the industry's products are essential for a comfortable and functional living space. Recently, there's been a growing emphasis on eco-friendly and sustainable offerings, reflecting the evolving consumer preferences for environmentally conscious options. These trends can be double-edged swords that benefit companies who innovate quickly to take advantage of them and hurt companies that don't invest enough to meet consumers where they want to be with regards to trends.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $610.6 million in revenue over the past 12 months, WD-40 is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.
As you can see below, WD-40’s 5.7% annualized revenue growth over the last three years was mediocre. This shows it couldn’t generate demand in any major way and is a tough starting point for our analysis.
This quarter, WD-40’s revenue grew by 5% year on year to $146.1 million, missing Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and suggests its newer products will not catalyze better top-line performance yet.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
WD-40 has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 15.6% over the last two years.
Taking a step back, we can see that WD-40’s margin dropped by 10 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.
WD-40’s free cash flow clocked in at $6.61 million in Q1, equivalent to a 4.5% margin. The company’s cash profitability regressed as it was 7.5 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.
Key Takeaways from WD-40’s Q1 Results
We were impressed by how significantly WD-40 blew past analysts’ EPS expectations this quarter. On the other hand, its revenue missed significantly and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.4% to $232 immediately following the results.
WD-40’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy.
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