Daily Stock Watch: ODC Stock Up on Earnings Beat

By Kirsteen Mackay


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Oil-Dri Corp (NYSE: ODC) stock reported record Q4 and full-year sales yesterday. ODC stock is up 8% in pre-market trading.

Why is ODC Stock Rising?

Q4 net sales rose 19% Y/Y to $93m, with business-to-business (B2B) up 22% and Retail and Wholesale up 18%. Price increases primarily drove this.

Q4 consolidated gross profit was $17.5m, up 18% Y/Y.

Full-year, the company achieved record revenues by raising prices during heightened demand. US and Canadian Cat litter sales were the main driver with an 11% increase Y/Y.

Margins slipped under the weight of inflationary pressures, with the domestic cost of goods sold per manufacturing ton rising 13% Y/Y.

What Does Oil-Dri Corp Do?

Oil-Dri Corporation of America (NYSE: ODC) develops, manufactures, and markets sorbent products for consumer and B2B markets.

The company's products, consisting primarily of cat litter, are used in the consumer, fluids purification, agricultural, industrial, and automotive markets. They are sold through the grocery products industry, mass merchandisers, warehouse clubs, and pet specialty retail outlets. 

The company sells branded scoopable litter, private label lightweight and heavyweight litter and accessories such as litter-tray liners.

Oil-Dri controls hundreds of millions of tons of specialty mineral reserves, including calcium bentonite, attapulgite and diatomaceous shale. It sells these to major edible oil producers and the animal health industry.

From its absorbent clay products, the company produces:

  • Cat's Pride and Jonny Cat branded premium cat litter and other private label cat litter.

  • Oil-Dri branded floor absorbents.

  • Amlan branded animal health and nutrition solutions for livestock

  • Agsorb and Verge agricultural chemical carriers.

Oil-Dri has been in the fluid purification area for vegetable oil refining for quite some time. It sells jet fuel purification products and operates in the renewable diesel industry.

Antibiotics in animal feed have been a growing concern as humans build up resistance and antibiotics can stop working. Thus, Oil-Dri developed and now sells mineral-based antibiotic-alternative feed additives. This segment is seeing significant growth.

The company's mines and manufacturing facilities are located in Georgia, Mississippi, Illinois, and California. Oil-Dri also operates processing plants in Canada and England and has subsidiaries in Switzerland, China, Indonesia, and Mexico.

Founded in 1941, the company is a vertically integrated, global organization with extensive mineral reserves, innovative product development, efficient manufacturing operations, and effective sales and marketing strategies.

Q4 and Fully-Year Update

Consolidated net sales for the fiscal year 2022 reached an all-time high of approximately $349m, reflecting a 14% increase Y/Y.

Daniel S. Jaffee, President and Chief Executive Officer, stated,

Despite numerous challenges, including rampant inflation, supply chain disruptions, and logistics delays, I am pleased with the record-breaking consolidated net sales we achieved for both the fourth quarter and full fiscal year.

He also mentioned how pleased he is with the margin and profit improvements seen in Q4. Adding:

We are cautiously optimistic that this momentum will carry over into fiscal year 2023. During the past twelve months, we successfully delivered on our strategic objectives to grow our animal health and cat litter businesses.

During this fiscal year, 2022, Oil-Dri shuffled some of its subsidiaries. Its co-packaging coarse cat litter business was moved from the B2BProducts Group to the Retail and Wholesale Products Group.

Its wholly-owned subsidiary in the United Kingdom moved from the Retail and Wholesale Products Group to the B2BProducts Group.

Looking ahead, the company is focused on restoring profitability and growth.

How Does Oil-Dri Corp Make Money?

Oil-Dri Corp makes money selling cat litter and industrial and sports products.

Full-year net sales from Oil-Dri's Retail and Wholesale Products Group rose 13% Y/Y to $2.35m. This was driven by increased cat litter sales and industrial and sports products.

Total cat litter net sales rose 11% Y/Y, driven by organic volume growth, expanded distribution, price increases in response to rising costs, and the reduced need for trade spending because of higher demand.

ODC Stock Financial Metrics

ODC stock has a price-to-earnings ratio (P/E) of 165.72. Its price-to-book-value (P/BV) is 1.08. ODC stock comes with a dividend yield of 4.9%.

Over the past year, ODC stock has traded between $22.14 and $37.20. Today it trades at around $22.87. Year-to-date, the Oil-Dri stock price is down nearly -30%, while the S&P 500 is down -23.49% over the same period.

In January 2022, ODC raised its dividend rate for the 19th consecutive year.

Is ODC Stock a Good Investment?

Oil-Dri is responding to rising input costs by raising its prices. Cat litter is a relatively resilient business, and its animal health segment is one to watch.

However, its margins are tightening, and a slowdown in demand could affect its growth strategy.

The ODC share price is down -43% in five years and has significantly declined this year alone.

It is encouraging to see its earnings and revenues rise, but the share price is trading at a high multiple.

While the dividend is a nice buffer, shareholder risk remains, particularly in the current economic climate. 

If you enjoyed our Oil-Dri Corp coverage, you might be interested in our recent Daily Stock Watch articles or our IPO coverage.

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This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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