Acme United Corp. (ACU) 18Q1 Results

The company reported diluted EPS of $0.24 per share, up from $0.21 a year ago.  Sales declined 1% to $31.4 million due mostly to a non-repeat of a large order from a distributor who was launching a first aid kit program in last year’s quarter.  On a constant currency basis, sales were flat.

The gain in net income came mostly from cost cutting.  Acme’s SG&A expenses declined by about $500,000 or as a percent of sales from 33.9% to 32.7%, which more than offset the decline in gross profit of about $324,000.  Management said that it was on track to achieve its goal of a $2 million expense reduction in 2019.

EBITDA increased from $2.14 million to $2.35 million, while estimated capital expenditures dropped from about $900,000 to only $380,000.  Even so, a $2.1 million reduction in working capital produced negative free cash flow of about $800,000, according to my estimates.  (Full financial statements will be available on or about May 10.) After estimated dividends of $400,000 offset by increased borrowings of about $700,000, Acme’s cash balance declined by about $600,000.

Management reaffirmed its 2019 guidance of $140-$143 million of sales, $5.0-$5.3 million of net income and EPS of $1.41-$1.50.  After raising the dividend by another penny per quarter, the dividend yield is now a solid 2.2%.  At the current price of $22.00, the stock is now valued at 15.1 times forward earnings, based upon the midpoint of management’s guidance.  Management’s guidance implies revenue and profit growth of about 4% for the balance of the year and 10% EPS growth, due to a reduction in the share count.

Although the stock still trades at a modest discount to the broader market averages, it has run up fast in a short period of time. Consequently, I believe that the market will want to see further confirmation that the company can achieve its 2019 revenue and earnings targets, with an eye toward further improvement in 2020, before the stock moves higher on a sustainable basis from here.

Stephen P. Percoco
Lark Research
839 Dewitt Street
Linden, New Jersey 07036
(908) 975-0250

© 2015-2024 by Stephen P. Percoco, Lark Research.   All rights reserved.

This blog post (as with all posts on this website) represents the opinion of Lark Research based upon its own independent research and supporting information obtained from various sources. Although Lark Research believes these sources to be reliable, it has not independently confirmed their accuracy. Consequently, this blog post may contain errors and omissions. Furthermore, this blog post is a summary of a recent report published on this subject and that report provides a more complete discussion and assessment of the risks and opportunities of any investment securities discussed herein. No representation or warranty is expressed or implied by the publication of this blog post. This blog post is for informational purposes only and shall not be construed as investment advice that meets the specific needs of any investor. Investors should, in consultation with their financial advisers, determine the suitability of the post’s recommendations, if any, to their own specific circumstances. Lark Research is not registered as an investment adviser with the Securities and Exchange Commission, pursuant to exemptions provided in the Investment Company Act of 1940. This blog post remains the property of Lark Research and may not be reproduced, copied or similarly disseminated, in whole or in part, without its prior written consent.

This entry was posted in ACU, Industrials and tagged . Bookmark the permalink.