Household products company WD-40 (NASDAQGS:WDFC) fell short of analysts' expectations in Q1 CY2024, with revenue up 6.8% year on year to $139.1 million. On the other hand, the company's full-year revenue guidance of $585 million at the midpoint came in 1.2% above analysts' estimates. It made a GAAP profit of $1.14 per share, down from its profit of $1.21 per share in the same quarter last year.

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“We have made significant progress against our Four-by-Four strategic framework including the recent announcement of the acquisition of our Brazilian marketing distributor. Today, we are also announcing the decision to pursue a sale of our U.S. and U.K. Homecare and Cleaning Products portfolio, allowing us to focus on our core, higher-margin maintenance products while also creating headspace for future innovation,” said Steve Brass, WD-40 Company’s President and Chief Executive Officer.

Short for “Water Displacement perfected on the 40th try”, WD-40 (NASDAQGS: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

WD-40 is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 8% over the last three years was decent for a consumer staples business.

This quarter, WD-40's revenue grew 6.8% year on year to $139.1 million, missing Wall Street's estimates.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

WD-40's free cash flow came in at $16.67 million in Q1, up 98.5% year on year. This result represents a 12% margin.

Over the last two years, WD-40 has shown strong cash profitability, giving it an edge over its competitors and the option to reinvest or return capital to investors while keeping cash on hand for emergencies. The company's free cash flow margin has averaged 12%, quite impressive for a consumer staples business. Furthermore, its margin has averaged year-on-year increases of 18.6 percentage points over the last 12 months. Shareholders should be excited as this will certainly help WD-40 achieve its strategic long-term plans.

Key Takeaways from WD-40's Q1 Results

It was good to see WD-40's full-year revenue forecast beat analysts' expectations. We were also happy its gross margin narrowly outperformed Wall Street's estimates. On the other hand, this quarter's revenue and operating margin unfortunately missed. Furthermore, even though it raised its full-year EPS guidance, that forecast missed analysts' estimates as well.

During the quarter, the company announced the acquisition of a Brazilian marketing distributor. Today, it also announced its intentions to divest its U.S. and U.K. Homecare and Cleaning Products segments. WD-40's goal with these strategic moves is to focus on its core, higher-margin maintenance products.

Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The market was likely expecting more, and the stock is down 4% after reporting, trading at $245 per share.

So should you invest in WD-40 right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.