Forget Alcoa (AA) if you haven't already. Brian Sozzi of Belus Capital Advisors says WD-40 Company (WDFC) - the company that makes the market leading industrial machinery lubricant- is where investors should go if they're looking for a good "tell" for the global economy. It's also an extremely well-run operation making them a more reliable indicator of demand and industrial activity.
Based off what we've seen today from WD-40 the world isn't in such horrible shape. For its fiscal third-quarter WDFC reported net earnings of 66-cents on revenues of $93.1 million. The Street was expecting 56-cents on revenue of $89.5 million. For the full year WD40 expects to earn $2.40 to $2.48 versus estimates of $2.39. Shares of WDFC are nearly 30% higher for 2013 so far.
All of which is good news for shareholders but what Sozzi really likes about the company is that their balanced exposure to world markets and wide array of applications for its core product means WD-40 has its finger on the pulse of almost any line of business.
For the quarter just ended the company got 51% of its revenues from the Americas, 35% via Europe and the rest from China.
"This is on-demand stuff," explains Sozzi in the attached video. If you're machines are sitting idle you don't need more lubricants. On the other hand if you're getting new orders "you're going to have to go out and buy your WD-40 to make sure you're machines operate."
For the record WD-40 management is seeing mediocre growth in the U.S., mild weakness in China and some signs of life in Europe. Just because it's a great "tell" doesn't mean WD-40 always says something radically different than conventional wisdom.
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