Acme United Searching for Acquisition in Canada or Europe

Acme United (ACU – $18.47) again reached record sales and earnings in the first quarter of 2015. Especially the Westcott school & office products brand outperformed. Its scissors continue to gain market share, and Orbit, the latest member of the iPoint electric pencil sharpener family, is now available in most major retailers.

Also First Aid Only, the supplier of first aid and Smart Compliance kits, contributed nicely to the sales increase in the first quarter. The benefits of the combined purchasing power and the further integration of the three first aid brands will start to have a bigger impact on Acme’s bottom line in the coming quarters. The full optimization of the first aid brands, which will lead to cost savings of up to $1 million annually, is the Company’s main goal this year.

The decline of the Canadian dollar and euro caused earnings in the first quarter to be two cents per share lower than expected. Positive news is that the currencies have stabilized in recent weeks, while selling prices and costs in Canada and Europe are being adjusted. The increased sales prices should start to have a positive impact from the third quarter.

Interesting to know is that Mr. Johnsen said during the first quarter conference call that the Company is actively looking for an acquisition, preferably in Canada or Europe. The flip side of the declining currencies is that company valuations in those regions have become much more attractive for a U.S. based company.

Due to the sharp and unexpected decline of the Canadian dollar and euro, Acme’s management adjusted the Company’s guidance for 2015 slightly downwards. It now foresees sales to reach between $118 and $120 million in 2015, still an increase of 10 to 11.9 percent respectively compared with 2014. In addition, it expects earnings per share in 2015 to come in at between $1.45 and $1.50, up 6.6 and 10.2 percent respectively compared with 2014.

Based on these numbers, we reiterate our buy recommendation for Acme United Corp. with a price target of $31.83, which is 72% above today’s stock price.

Download the first quarter 2015 Acme United Company Report.

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