Why Acme United’s Third Quarter Earnings Grew by 31%

Acme United Corporation (US:ACU – $20.92) is a worldwide supplier of cutting devices, measuring instruments and first-aid products for school, home, office, industrial and hardware use.

The Company reported net income of $1,059,000 or $0.30 per diluted share, for its third quarter ended September 30, 2019 versus $807,000, or $0.23 per diluted share, for the comparable period last year. This is an increase of 31% in net income and 30% in diluted earnings per share.

Especially Acme’s SmartCompliance first aid cabinets, which provide comprehensive safety products to employers, showed strong sales growth. This is encouraging and demonstrates how much employers value the fast and easy to requisition first aid system.

Next to first aid, also the Camillus, Cuda, and DMT brands are doing well. They continue to gain market share, and are expected to grow again in 2020.

Significantly contributing to the bottom line was the cost savings program that the Company instituted a year ago. It let go of a number of people, cut back on print advertising, and put more focus on social media. Also, the Company started shipping and productivity initiatives at its Rocky Mount warehouse in North Carolina. These savings total about $2 million annually. Acme continues to identify cost-saving opportunities and is formulating new targets for 2020.

Acme United is well on track to achieve its ninth consecutive year of record sales. In addition, the Company has reduced its net debt by close to $11 million during the past 12 months. A solid achievement, which provides capital for a potential acquisition.

Acme United’s management is providing guidance for fiscal year 2019 of approximately $142 million in sales, net income of $5.2 million and $1.48 earnings per share.

We reiterate our buy recommendation for Acme United Corp. with a price target of $29.39, which is 40% above today’s stock price.

 

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