Acme United All Set for Strong Second Half of 2018

Acme United Corporation (ACU – $22.20) is a worldwide supplier of cutting devices, measuring instruments and first-aid products for school, home, office, industrial and hardware use.

Acme United’s sales in the second quarter, ended June 30, 2018 reached $39.8 million, an increase of 2% compared with sales of $38.8 million in the second quarter of 2017. The Company showed record sales performances in many categories and areas, including first aid and safety, Camillus and Cuda cutting products, DMT sharpening tools, Spill Magic absorbents, and the European business.

Although Westcott back to school products were affected in the second quarter by an increasing shift from retail to online, they are expected to strongly rebound in the current quarter. This is a trend that is expected to become even stronger the following years.

Acme’s online sales are growing very rapidly, particularly at Amazon, and also at Jet, which is part of Walmart. The Company has a full team of people working on online content, reviews, and search optimization. This is paying off!

The SmartCompliance business is becoming a big success. This is a typical razor/razorblade sales model, as Acme United initially benefits from the placement of the first aid kits, and then as people use the components, there’s a strong resale business. In fact, revenues from refills about equal sales of the kits.

In the current quarter, Acme will roll out its first aid and safety products to the largest industrial distributor. Moreover, the Company initiated a major distribution arrangement with a food service company that has started to take SmartCompliance throughout its entire customer base. Acme United is clearly gaining share in this $600 million market segment.

The Company reaffirmed its guidance for 2018 of approximately $140 million in revenues, $5.7 million in net income, and $1.53 earnings per share. Consequently, we reiterate our buy recommendation for Acme United Corp. with a price target of $32.05, which is 44% above today’s stock price.

Smallcaps.us Advice: Buy	Price Target: $59.86	Latest Company Report (pdf)
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