How are energy investors positioned?
On Monday, DA Davidson sustained its positive outlook on WD-40 Company (NASDAQ:WDFC), reaffirming a Buy rating with a steady price target of $322.00. The endorsement comes after a meeting with the company's CEO and CFO, where the executives expressed confidence in their strategy to accelerate revenue growth, as reflected in the company's forecast for fiscal year 2025. WD-40 anticipates a year-over-year increase of 6%-11% in revenues.
The company's executives are also optimistic about improving gross margins, aiming to approach a 55% mark, up from 53.4% in fiscal year 2024. This anticipated growth in margins is attributed to the company's focus on selling more premium products. Additionally, current oil prices around $70 are viewed favorably, as the company's guidance is based on an oil price assumption of $70-$90.
Despite a 20%-30% increase in tin plate costs over the last six months, WD-40's new supply chain leader is actively developing strategies to mitigate these rising expenses. The company's domestic production of cans ensures that it faces minimal tariff risks, as all cans sold in the United States are manufactured locally.
The $322 price target set by DA Davidson is anchored on a 53 times multiple of the company's projected calendar year 2026 earnings per share (EPS) of $6.07. This valuation is within the five-year historical range of the company's earnings multiples, which has varied from 25 to 56 times. WD-40's management team remains committed to executing their growth plan and navigating through the challenges of cost fluctuations in their supply chain.
In other recent news, WD-40 reported strong fourth-quarter sales, marking an 11% increase year-over-year to $156 million. The company's full-year sales of the WD-40 Multi-Use Product also rose by 11%, reaching $453 million. This robust performance was noted across global markets, particularly in the EIMEA and Asia Pacific segments.
The company plans to divest its household cleaners business in the first half of fiscal 2025, which is expected to reduce annual sales by $23 million and EPS by $0.33. Despite a 4% decrease in U.S. sales compared to the previous year, CEO Steve Brass's strategy is credited with accelerating top-line growth. Lastly, the company projects net sales growth of 6% to 11% for fiscal year 2025, targeting $600 million to $630 million in constant currency sales.
InvestingPro Insights
WD-40 Company's recent performance and future outlook align with several key metrics and insights from InvestingPro. The company's revenue growth of 9.92% over the last twelve months and 11.06% in the most recent quarter supports management's optimistic forecast for fiscal year 2025. This growth trajectory is further reinforced by an InvestingPro Tip indicating that WDFC has maintained dividend payments for 32 consecutive years, demonstrating financial stability and shareholder commitment.
The company's focus on improving gross margins, aiming for 55%, is reflected in the current gross profit margin of 53.38% for the last twelve months. This aligns with management's strategy to sell more premium products and enhance profitability.
InvestingPro data shows a P/E ratio of 54.2, which is consistent with DA Davidson's valuation based on a 53 times multiple of projected earnings. An InvestingPro Tip notes that WDFC is trading at a high earnings multiple, which investors should consider in light of the company's growth prospects and market position.
For readers seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for WD-40 Company, providing a deeper understanding of the company's financial health and market position.
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