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WD-40 Company (WDFC) Misses Q3 Bottom Line Estimates, Blames FX Headwinds

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WD-40 Company (NASDAQ:WDFC) reported an adjusted net income of $11.0 million, or $0.75 per share for its fiscal third quarter which ended May 31, up 5% from the same quarter in the prior year. Revenues were reported to be $92.5 million, down 3% compared to the prior year’s third quarter. Year-to-date total net sales were $286.2 million, a slight increase compared to the prior year fiscal period. The company is noting that foreign currency exchange headwinds have negatively impacted its “solid performance and results.” Wall Street was expecting an EPS of $0.76. On a constant currency basis, total net sales would have been $96.5 million for the third quarter, the lubricants company revealed.WD-40 Company (WDFC), NASDAQ:WDFC,

WD-40 Company (NASDAQ:WDFC) also reported that its gross margin increased to 53.3% in the third quarter compared to 51.4% in the third quarter last year, and advertising and sales promotion expenses were down by 15% in said quarter to $5.5 million compared to the fiscal third quarter of 2014. It has also revised its outlook for the full 2015 fiscal year, with net sales growth expected to be between flat and 2%, and net sales expected to be between $383 million and $390 million. Net income is projected to be between $44.5 million and $45.4 million, the firm announced, while expected diluted earnings per share was pegged to be between $3.03 and $3.09. The bottom line miss coincides with WD-40 Company (NASDAQ:WDFC) witnessing a decrease in the number of hedge funds tracked by Insider Monkey which had long positions in the stock by the end of the first quarter.

On March 31, a total of eight of the hedge funds tracked by Insider Monkey were long in this stock, an 11% decrease from one quarter earlier. Total value of holdings, however, increased 9.44% to $56.8 million by the end of said period from $51.9 million in the preceding quarter. The stock grew only 4.07% in the first three months of the year, indicating some net buying of the company’s shares by the smart money.

At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 135% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.

As for insider transactions, which we also track to tell whether executives at companies are also investing in their firms’ stock, there were no share purchases made by insiders of WD-40 Company this year. There have been regular share sales, however, by directors and other officers. The most recent sale was by Director Richard Collato on June 18, of 3,500 shares. President and CEO Garry Ridge also sold 3,564 and 6,706 shares on June 16 and 17 respectively. Keeping this in mind, let’s analyze the recent smart money action regarding WD-40 Company on the next page.

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