Acme United Price Target Raised Thanks to Outstanding Outlook

After already having achieved an outstanding first quarter, Acme United (ACU – $20.98) set a new all-time sales and earnings record in its second quarter, ended June 30, 2016. During that three months period, the Company posted a 21% increase in both sales and earnings compared with the second quarter of 2015.

Record back-to-school sales, led by Westcott kid scissors and iPoint pencil sharpeners, were strong contributors to this achievement. Also, Westcott shears gained market share in the office channel and their distribution was broadened in the crafts market.

Next to school and office products, first aid is a second major growth driver for Acme. Production capacity was recently added, and may have to be expanded even further. SmartCompliance kits and their refills have become very popular because they are cheaper and more convenient for businesses. The razor/razor blade model ensures a continual sale of refills once the cabinets are installed.

Also DMT is doing very well. In the United States, Canada and Europe, customers are enthusiastic about the synergies with tools from other Acme brands, such as Clauss, Camillus or Cuda. Only five months after the sharpening tools manufacturer was acquired by Acme United, its production had to be expanded to meet demand.

In addition, Clauss, Camillus and Cuda tools continues to perform well in the industrial and sporting goods market.

Acme United’s strong momentum, which it experienced during the first half of 2016, is expected to continue the rest of the year. Consequently, the Company’s guidance for fiscal 2016 was raised to revenues of $123 million, net income of approximately $5.8 million and earnings per share of $1.55. Thanks to these excellent prospects, Acme’s stock price recently hit a new all-time high of $22.19.

Based on our outlook and calculations, we reiterate our buy recommendation for Acme United Corp. with a price target of $30.65, which is 46% above today’s stock price.

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