Zep Tops EPS Estimates, Misses on Revenue

Zep, Inc. ZEP is down on Tuesday after reporting solid second quarter EPS, but missing on the revenue front. The Atlanta-based firm's EPS rose nine percent to $0.12, topping estimates of $0.11. Revenue finished up 7.7 percent at $163.4 million, but fell short of the approximately $167 million analysts hoped for. Sales Grow on Multiple Fronts Second quarter sales results were due in part to growth in Zep's retail business, which was driven by sales in the automotive aftermarket and to new retailers. The chemical firm also saw growth in its distribution channel, led by sales to its industrial/MRO customers. Meanwhile, acquisitions added approximately $17.4 million to net sales during the quarter. Zep Acquires Ecolab's Vehicle Care Division On December 1, a wholly-owned subsidiary of Zep completed its acquisition of Ecolab's ECL vehicle care division. The deal was worth around $120 million. The combination of this acquisition and Zep's existing North American Sales and Service vehicle-wash operations, along with its Niagara and Washtronics fleet-wash operations, formed a new “Zep Vehicle Care” platform. This new platform represents approximately 13 percent of the company's net sales on a pro forma basis. Zep expects the transaction to be “modestly accretive” to earnings in fiscal 2013. And, once integration activities are complete, it anticipates “additional synergies” of $1.5 to $2 million per year. The Midas Touch On December 10, Zep announced that its subsidiary, Amrep, Inc., received the Toyota TM Quality Alliance 2012 Gold Supplier Award. The award is given to top parts and accessories suppliers who have consistently demonstrated their commitment to operational quality as well as product development, quality and support. Then, on January 22, the company announced Amrep won Subaru's Gold Supplier Excellence Award for the third consecutive year. According to Zep, this is one of the highest honors presented by the auto maker. May Pay Day On March 21, Zep declared a quarterly cash dividend of four cents per share. It will be paid to shareholders of record as of April 17 on May 1. Market Reaction Zep has hovered in the $14 to $15+ range since late-December and continues to do so. Yet, its lower-than-expected revenue has outweighed its successful earnings per share, sending it downward as Tuesday gets underway. After gaining nearly three percent on Monday, Zep is down around 1.5 percent on Tuesday.