Acme United On A Roll And Looking Forward To 2024

Acme United Corporation (US:ACU – $37.49) made significant progress during the third quarter of 2023. In fact, the Company reached its highest third quarter income ever! While net sales for the three months ended September 30, 2023 were $50.4 million, about flat compared to sales of $49.7 million in the same period of 2022, net income in Q3 2023 was $2.2 million, or $0.58 per diluted share, compared to $64,000, or $0.02 per diluted share, for the same period in 2022.

In addition to the record breaking third quarter, Acme’s management also indicated that the fourth quarter has started strongly. Moreover, the Company is winning new business for 2024 in its Westcott and first aid businesses, as well as DMT sharpeners.

In September, Acme acquired Hawktree Solutions in Canada, which sells first aid and medical products and is the exclusive licensee of the Canadian Red Cross for many of the supplies used in their training programs and relief efforts. Hawktree will expand the Company’s product line to address devastating fires, floods, and earthquakes.

Although buying a company in receivership may sound a bit as an adventure, in this case, we believe that Acme has again struck gold. It’s important to note that Hawktree was doing very well before COVID with steady sales and attractive profit margins.

The sale of Cuda and Camillus is a clear win for all parties involved. As for GSM, this acquisition ensures its further expansion into the fishing and cutlery segments of the outdoor industry. They have shown many times in the past that they are able to fit in a new brand into their existing portfolio and expand its worldwide reach.

Acme will recognize an after-tax gain on the sale of approximately $10.0 million during the fourth quarter of 2023. As a result of this transaction, the Company’s bank debt will the lowest that it has been in many years, which is important in this relatively high interest period.

The Company also continues to generate productivity improvements. The productivity plan, which was implemented late last year, and which was scheduled to save $5 million annually, is expanding to $6 million. This will undoubtedly also have a positive effect on margins.

All in all, Acme United’s future looks bright with expected top-line growth, expanding productivity improvements and growing margins.

We reiterate our buy recommendation for Acme United Corp. with a price target of $48.91 for 2023, which is 30% above today’s stock price. Smallcaps Recommendation: BUY.

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