Acme United Forecasts Solid Growth in 2019 Thanks to Cost Reductions and Sales Increases
Acme United Corporation (US: ACU – $17.03) is a worldwide supplier of cutting devices, measuring instruments and first-aid products for school, home, office, industrial and hardware use.
In 2018, the Company achieved record sales for the 8th consecutive year. Despite a setback in the online sales channel during Q2 and Q3 of 2018, the Company remarkably recovered in the last quarter of the year with a 39% increase in operating profit compared with the fourth quarter of 2017.
During the third quarter, the Company began reducing recurring costs through a series of productivity initiatives. It expects annual savings of approximately $2 million in purchasing, advertising, selling and personnel expenses. At the same time, several sales initiatives should drive top line growth. For example, the Company introduced a new line of Westcott scissors that incorporate the glide technology. These scissors, which have a low friction pivot with adjustable tension, cut extremely fluidly and efficiently.
The Company announced new ceramic box openers that are geared towards industrial safety and consumer markets. Westcott also introduced new glue guns, glue sticks and cutting tools for the craft market. The first aid business introduced the next generation safety hub ecosystem and a new line of modern first aid stations that can be customized with different industries.
Distribution of Spill Magic cleanup absorbents has expanded to industrial wholesalers, online customers, and new end-users. New DMT diamond sharpeners that automatically adjust their sharpening angles were recently introduced and are expanding distribution. Camillus Knives continues to set new sales records.
As a result of all of these efforts, Acme United is forecasting that it will have another record year in 2019. For the year, the Company’s management is providing guidance of approximately $140 to $143 million in sales, net income of $5.0 to $5.3 million and $1.41 to $1.50 earnings per share.
Based on our outlook and calculations, we reiterate our buy recommendation for Acme United Corp. with a price target of $27.14, which is 59% above today’s stock price.
|Smallcaps.us Advice: Buy
|Price Target: $54.84
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