Q1:18 Highlights

• Q1:18 revenues were $31.7 million, up 14.3% from Q1:17, on account strong performance across all geographies including US (+13% YOY), Canada (+8% YOY) and Europe (+10% YOY). The results were driven by strong sales of first aid and safety products in the US and market share gains in office and DMT products in Europe.
• Online sales were very strong in 1Q18 and registered growth of over 100% YOY. Online sales have increased in excess of 100% annually for the past three years.
• Gross Margins for Q1:18 were 38.2%, which was flat compared to 38.1% in Q1:17.
• Adjusted earnings per share in Q1:18 was $0.21 vs. $0.18 in Q1:17, an increase of 17% YOY.
• The management guided for sales of ~$140 million, net income of $5.7 million and earnings per share of $1.53 for FY:18.
• We lower our earnings estimates for FY:18 to $1.53 factoring in the latest management commentary. We maintain our BUY rating and lower our target price to $25.25, with an implied capital appreciation potential of ~18%.

RISKS

• ACU’s results can be negatively impacted by weak economic activity; rising commodity input costs; timing of customer orders; foreign exchange fluctuations; and competitor pricing
• There are significant competitors in the firm’s operating segments, including J&J and Fiskars, and barriers to entry are relatively low