WD-40 Stock Sank After Earnings—Here Are 5 Reasons Bulls Aren’t Worried

Core Viewpoint - WD-40's fiscal Q1 2026 earnings report fell short of analyst expectations, leading to a market sell-off, but this presents a potential buying opportunity for total return investors [2][3] Group 1: Revenue Performance - The company's revenue for Q1 was $154.4 million, growing less than 1%, primarily due to foreign exchange (FX) conversion, with a decline of over 2% on an FX-neutral basis [4] - Direct market sales increased by 8%, driven by growth in the Americas and EIMEA regions, as well as the Specialty products segment [4] - The company anticipates that indirect-market softness will normalize as the year progresses [5] Group 2: Profitability and Margins - Despite disappointing earnings, gross margin expanded by 140 basis points, indicating improved profitability and setting the stage for future earnings strength [6][7] - The increase in selling, general and administrative (SG&A) expenses by 10% was linked to non-recurring charges, which had minimal impact on cash flow [7] - The free cash flow margin remained stable at 17.5%, allowing for continued capital returns, including dividends and share repurchases [7] Group 3: Future Outlook - WD-40 reaffirmed its fiscal 2026 guidance, indicating expectations for results to fall at the high end of the range despite the weak Q1 results [9] - The stock is trading near long-term lows, suggesting a potential rebound that could yield high-double-digit total returns within a few years [8]