ACCO - ACCO Brands (ACCO) - Post Call Commentary: Looking for More Growth in 2022
Transformation to Lead to More Growth. Over the past years, ACCO has pivoted the business to consumer and technology products, with these faster growing categories accounting for almost 60% of sales. In addition, ACCO has moved into faster growing channels, such as retail and e-tail. We note Walmart is now the largest customer accounting for nearly 10% of revenue, with Amazon not far behind. We believe this combination will lead to faster growth going forward.Impressive Comp Sales. ACCO posted impressive comp sales during 2021, even with numerous headwinds. North America comp sales grew a reported 2%, but were up 7% excluding the large non-recurring tech order in 2020. EMEA comp sales grew 15%, and while International comp sales fell 3%, this reflects the near closure of two key markets during 2021 due to COVID.Debt and Capital Allocation. ACCO's net debt leverage ratio fell to 3.3x at the end of 4Q, down from 5.2x at end of 4Q21 and is now below where it stood prior to the PowerA acquisition. For 2022, we expect a return to a historically more balanced capital allocation that will include dividends, debt reduction, and opportunistic repurchases of shares. ACCO has $125 million remaining on its stock repurchase authorization.2022 Projections. With the ongoing rebound from COVID and the transformation into faster-growing categories, we expect ACCO to post another year of increased revenues and earnings. While the first quarter continues to face some headwinds, we project improvement throughout the year. For 1Q22 we are projecting $420 million of revenue, a GAAP EPS loss of $0.01, and adjusted EPS of $0.09. For the full year, we estimate revenue of $2.1 billion, GAAP EPS of $1.19, and adjusted EPS of $1.58.Maintain Outperform. We are maintaining our Outperform rating on ACCO shares and our 12-month price target of $12.00. At our $12.00 target, ACCO shares would trade at 7.6x our 2022 adjusted EPS estimate, 1.0x on an EV/Sales basis, and 7.0x on an EV/EBITDA estimate. And investors can enjoy a 3.7% dividend yield while waiting for a full return to normalcy to pan out. Read More >>