Monday, DA Davidson updated its outlook on WD-40 (NASDAQ:WDFC) shares, raising the price target to $322 from $303, while reiterating a Buy rating. The company's fourth fiscal quarter sales showed an 11% year-over-year increase, surpassing expectations. The operating profit met consensus estimates, despite being impacted by high incentive compensation expenses.
The firm's guidance for fiscal year 2025 indicates projected sales growth between 6% to 11% year-over-year, which is more optimistic than the consensus estimate of 6%. Earnings per share (EPS) are also anticipated to outperform expectations, with a forecasted increase of 9% to 14%, compared to the Street's prediction of 9% growth.
The planned divestiture of the household cleaners business in the first half of fiscal 2025 is expected to reduce annual sales by $23 million and EPS by $0.33. This has led to a revision in the FY25 earnings per share estimate. However, the company's CEO, Steve Brass, has implemented a strategy that is credited with accelerating top-line growth.
DA Davidson has initiated an EPS estimate of $5.93 for fiscal year 2026 and adjusted the price target based on a 53 times multiple of the estimated calendar year 2026 EPS of $6.07. This new price target reflects confidence in the company's future performance and the anticipated positive impact of its strategic decisions.
In other recent news, WD-40 Company (NASDAQ:WDFC) has reported record-breaking fourth quarter net sales of $156 million, marking an 11% increase year-over-year. The company's full-year sales of the WD-40 Multi-Use Product have also seen an 11% rise, reaching $453 million. The firm has shown improved gross margins and strong performance across global markets, with notable growth in EIMEA and Asia Pacific segments.
For the fiscal year 2025, WD-40 has projected net sales growth of 6% to 11%, targeting $600 million to $630 million in constant currency sales. The company also expects its operating income to range from $95 million to $100 million.
The company's CEO, Steve Brass, has highlighted a potential $1.2 billion in global sales for the WD-40 Multi-Use Product. The firm's ongoing divestiture process of home care and cleaning brands in the Americas and the U.K. is expected to complete in the first half of fiscal year 2025, potentially boosting annual gross margins by approximately 60 basis points.
Despite a 4% decrease in U.S. sales compared to last year and potential economic uncertainties, WD-40 remains optimistic about its future growth prospects. The company's strategic focus on geographic expansion, premiumization, product growth, and digital commerce enhancement has contributed to its strong performance in fiscal year 2024.
InvestingPro Insights
WD-40's recent performance and future outlook align with several key metrics and insights from InvestingPro. The company's market cap stands at $3.4 billion, reflecting its strong position in the industry. WD-40's revenue growth of 9.92% over the last twelve months and 11.06% in the most recent quarter supports DA Davidson's observation of surpassing sales expectations.
InvestingPro Tips highlight that WD-40 has raised its dividend for 9 consecutive years and has maintained dividend payments for 32 consecutive years, indicating a commitment to shareholder returns. This aligns with the company's solid financial position, as evidenced by its ability to cover interest payments with cash flows and maintain a moderate level of debt.
The company's P/E ratio of 51.82 and PEG ratio of 8.43 suggest that WD-40 is trading at a high earnings multiple relative to its near-term earnings growth. This valuation could be justified by the market's confidence in the company's growth strategy, as outlined in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for WD-40, providing a deeper understanding of the company's financial health and market position.
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