Zep Earnings Preview

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Zep (NYS: ZEP) will look to match Wall Street forecasts for the third consecutive quarter. The company will unveil its latest earnings on Thursday, October 13. Zep produces, markets, and services a range of cleaning and maintenance solutions for commercial, industrial, institutional, and consumer end-markets.

What analysts say:

  • Buy, sell, or hold?: Analysts strongly back Zep, with three of five rating it a buy and the remainder rating it a hold. Analysts like Zep better than competitor Clorox Company overall. Zep's rating hasn't changed over the past three months.
  • Revenue Forecasts: On average, analysts predict $175.6 million in revenue this quarter. That would represent a rise of 8.8% from the year-ago quarter.
  • Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.37 per share. Estimates range from $0.36 to $0.39.

What our community says:
CAPS All-Stars are solidly behind the stock with 90% granting it an "outperform" rating. The community at large backs the All-Stars with 89.1% assigning it a rating of "outperform." Fools have embraced Zep, though the message boards have been quiet lately with only 21 posts in the past 30 days. Though still bullish, the CAPS rating of four out of five stars for Zep is a bit more pessimistic than the community assessment.

Management:
Zep's profit has risen year over year by an average of 33.8% over the past five quarters. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 2.7 percentage points in the last quarter. Revenue rose 9.7% while cost of sales rose 15.6% to $89.6 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

QuarterQ3Q2Q1Q4
Gross Margin46.7%46.7%49.6%48.2%
Operating Margin6.9%3.2%6.1%2.7%
Net Margin3.7%1.5%3.1%1.3%

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At the time this article was published

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