Sustained Record Sales And Earnings Position Acme United For More Growth In 2015

Acme United (ACU – $17.40) reported record sales and earnings for its third quarter, ended September 30, 2014. Sales reached $30.0 million, an increase of 36% compared to the third quarter in 2013. Net income in the third quarter of 2014 was $1,190,000, or $.34 per diluted share, up 24% in net income and 17% in diluted earnings per share.

In its first full quarter after being acquired by Acme, First Aid Only (FAO) contributed $4.3 million in sales and was accretive.

The integration of FAO into Acme’s two existing first aid brands, Pac-Kit and PhysiciansCare, is going smoothly. The initial goals of combining the sales forces and expanding the offerings have been completed. Next on the agenda are the reduction of duplicate products between the three first aid brands and the integration of Acme’s computer system at FAO.

In the coming months, the acquisition is expected to start generating cost savings as a result of the higher combined volumes that Acme will achieve. This should lead to lower negotiated freight costs, increased purchasing power for raw materials and access to new customers.

Sales guidance for 2014 is between $107 million and $109 million. This will be the first time in Acme’s history that its sales will surpass $100 million. Truly a significant milestone. At the same time, Mr. Johnsen, Acme United’s Chairman and CEO, foresees earnings in 2014 of $1.34 per share, slightly lower than the previous estimate, because there will be one-time costs for the move of the corporate headquarters in the United States and Hong Kong.

Ebola-related sales may give fourth quarter sales a boost and the Westcott, Camillus and Clauss product lines continue to grow. Based on the size of the recreational fishing market, it’s clear that the new fishing tools brand Cuda could become another strong sales and earnings generator for Acme.

Based on the excellent outlook and the sustained solid performance of the Company’s brands, we reiterate our buy recommendation for Acme United Corp. with a price target of $25.28, which is 45% above today’s stock price.

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