Current Quarter Expected To Be Very Strong For Acme United

Acme United Corporation (US: ACU – $32.00), the leading consumer products company with a focus on first aid and safety products, as well as cutting solutions, reported reduced financials in the first quarter of 2022 because significant orders couldn’t be shipped from China.

Despite a strong order flow in the first quarter, the Company was unable to ship about $4 million worth of produced goods. Most of the products that were delayed were for large mass market retailers. These customers typically ship the finished goods directly from the exporting ports in China to their distribution centers.

However, after Chinese New Year in February, COVID spread fast in China. As an immediate result, entire factories, ports and even cities were shut down. These direct import programs typically are very efficient and cost effective, but their just-in-time nature left them vulnerable to the port closures.

These $4 million worth of orders have been partially shipped today and will be entirely in the course of the second quarter. Moreover, the Company continues to see strong demand. As such, both sales and earnings are expected to be very strong for the current quarter.

Although sales and earnings were down in the first of quarter compared with last year, it happened for a clear and understandable reason. Meanwhile, ports in China have partially or completely reopened and approximately half of the delayed orders have already been shipped, with more on the way.

At the same time, demand in the second quarter continues to be strong. Acme has received new orders for alcohol prep pads for the U.S. Army and there’s a substantial first aid program to a mass market retailer, which will be shipped in Q2. In addition, the Company has received large inquiries for first aid kits and medical supplies, which may be related to the war in Ukraine. Moreover, there is lots of demand for cutting tools and Westcott school and office products, which is good news for the upcoming back-to-school season.

Finally, the Company continues to raise selling prices to offset increased product cost, wages and delivery expenses.

Although no earnings guidance for 2022 was given by the Company’s management, they are projecting substantial growth with sales expected to reach well over $200 million. As a result, Acme United is in for another record year.

We reiterate our buy recommendation for Acme United Corp. with a price target of $53.75, which is 68% above today’s stock price.

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