Why WD-40 Company (NASDAQ: WDFC) stock is falling

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WD-40 Company (NASDAQ: WDFC) stock fell over 4.9% in the after-hours session of January 10th, 2020 (Source: Google finance) as the company has reported first-quarter net income of $12.2 million, or 88 cents a share, against $13.3 million, or 95 cents a share, in the year-ago period. The company’s revenues declined 3% to $98.6 million from $101.2 million in the year-ago period. WDFC in the first quarter of FY 20 has posted decline in the gross margin percentage to 54.3% compared to 55.1% in the prior year fiscal quarter.

Moreover, the net sales in the Americas fell 2% in the first quarter mainly due to lower sales of maintenance products in the United States. Net sales in EMEA rose 1% in the first quarter mainly due to strong sales of 1001 Carpet Fresh in the United Kingdom. Net sales in Asia-Pacific fell 15% in the first quarter due to a 21% decline in sales in the Asia-Pacific distributor markets and a 23% decline in sales in China.

Additionally, the company has declared on a quarterly dividend of $0.67 per share reflecting an increase of 10 percent over the previous quarter’s dividend, which will be payable on January 31, 2020 to stockholders of record at the close of business on January 17, 2020.

On June 19, 2018, the Company had approved a share buy-back plan, which was effective on September 1, 2018. As per this, the Company is authorized to acquire up to $75 million of its outstanding shares through August 31, 2020. During the period from September 1, 2018 through November 30, 2019, the Company had repurchased 202,755 shares at a total cost of $34.6 million under this $75 million plan.

For fiscal year 2020, the company expects net sales growth to be between 3 and 7 percent with net sales expected to be in the range of $436 million and $453 million. Gross margin percentage for the full year is expected to be in the range of 54 and 55 percent. Advertising and promotion investments are projected to be in the range of 5.5 and 6.0 percent of net sales. The provision for income tax is expected to be in the range of 20 and 22 percent. Net income is anticipated to be in the range of $65.0 million and $66.2 million. Diluted earnings per share is expected to be in the range of $4.74 and $4.83, which is based on an estimated 13.7 million weighted average shares outstanding.

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