Oil-Dri Q2 Earnings Decline Y/Y Despite Record Revenue Growth

Shares of Oil-Dri Corporation of America ODC have declined 1.7% since reporting results for the second quarter of fiscal 2026. This compares with the S&P 500 index’s 2.1% fall over the same time frame. Over the past month, the stock has gained 1.7% against the S&P 500’s 2.9% slip.

Oil-Dri reported modest top-line growth but slightly lower profitability for the quarter ended Jan. 31, 2026. Consolidated net sales were $117.7 million, up 1% from $116.9 million in the year-ago period. Net income came in at $12.6 million, down 3% from $12.9 million a year earlier, while diluted earnings per share slipped 2% to 87 cents from 89 cents. Operating income declined 10% year over year to $15.7 million. The company also reported EBITDA of $21.7 million, down 2% from $22.2 million in the prior-year quarter.

Oil-Dri Corporation Of America Price, Consensus and EPS Surprise

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Segment Performance & Key Business Metrics

Oil-Dri’s results reflected mixed performances across its two main product groups: Business to Business (B2B) Products and Retail & Wholesale (R&W) Products.

The B2B Products Group posted fiscal second-quarter net sales of $42 million, down 3% from the prior year. Segment operating income declined 18% to $11.8 million from $14.3 million. Within the segment, the company’s agricultural business stood out with strong growth. Sales in this area rose 23% year over year to $11.2 million, driven by a favorable product mix, pricing and increased demand. However, this strength was offset by weakness in other areas, particularly animal health and fluid purification.

Amlan International, Oil-Dri’s animal health division, reported quarterly sales of $5.3 million, representing a sharp 32% decline from the prior year due to lost volume following the loss of a distributor’s key customer. Revenues from fluids purification products also slipped 4% year over year to $25.5 million amid softer demand related to renewable diesel filtration, though higher sales tied to edible oil and jet fuel purification partially mitigated the decline.

The Retail & Wholesale Products Group performed more strongly. Net sales in this segment rose 3% year over year to $75.8 million, supported primarily by higher sales of co-packaged and domestic cat litter products. Segment operating income, however, decreased 5% to $10.8 million from $11.3 million in the prior-year quarter.

Co-packaged cat litter sales increased 31% from a year earlier due to expanded offerings that now include lightweight litter products. Meanwhile, domestic cat litter revenues, excluding co-packaged products, totaled $56 million, representing a 0.5% year-over-year gain, supported by increased demand for crystal cat litter products.

Management Commentary

Management characterized the quarter as consistent with expectations despite several operational challenges. President and CEO Daniel Jaffee said the company faced “challenging year-over-year comparisons” and operational disruptions from a severe winter weather event that temporarily affected production and shipments.

According to Jaffee, Winter Storm Fern forced temporary shutdowns at several facilities, disrupted supply chains and delayed shipments near the end of the quarter. Despite those headwinds, he highlighted that the company still achieved the highest fiscal second-quarter consolidated net sales in its history, with strength in the agricultural and cat litter businesses supporting results.

During the earnings call, management also emphasized the company’s resilience in navigating the weather disruption. Executives highlighted the role of the company’s plant network and operational flexibility in maintaining customer service despite outages at several facilities.

Factors Influencing Results

Several factors affected Oil-Dri’s profitability in the quarter. Gross profit declined 6% year over year to $32.3 million, while the gross margin contracted to 27.4% from 29.5% in the prior-year period. The primary driver of this margin compression was a 4% increase in domestic costs of goods sold per ton.

Operating income also declined due to these higher production costs and storm-related disruptions that reduced fixed-cost absorption. However, slightly higher sales and a reduction in selling, general and administrative expenses helped partially offset the impacts. SG&A expenses declined 2% to $16.6 million due to lower corporate bonus accruals.

Other income also improved meaningfully, shifting to a small gain against expenses in the prior year due to foreign-exchange gains and reduced landfill modification costs.

Outlook

Management expressed confidence in the company’s outlook despite the near-term disruptions. Jaffee stated that Oil-Dri remains on track with its annual plan and expects the business to continue executing its strategic initiatives to support long-term growth.

He added that if current trends continue, the company anticipates surpassing last year’s annual net income.

During the earnings call, executives also highlighted ongoing innovation and product launches in the consumer products segment, including additional Cat’s Pride crystal litter offerings and a newly launched health-monitoring cat litter product designed to expand the brand’s presence in premium categories.

Other Developments

Oil-Dri continued to return capital to shareholders during the period. The company repurchased more than 150,000 shares for the first six months of 2026, reflecting management’s confidence in the long-term outlook of the business.

Cash and cash equivalents totaled $46.9 million at the end of the quarter, down from $50.5 million at the end of fiscal 2025, reflecting capital investments in manufacturing infrastructure improvements, share repurchases and dividend payments.

Overall, while Oil-Dri delivered record fiscal second-quarter revenues and continued growth in several product categories, margin pressure, weather-related disruptions and weakness in certain B2B businesses weighed on earnings performance in the quarter.

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