ACCO - ACCO Brands (ACCO) - Post Call Thoughts and Updated Models

Back-to-School. The Back-to-School season is off to a strong start. The North American market should see a strong season, while the improvement in Mexico and Brazil, neither of which are back to pre-COVID levels, should add to demand. With in-country manufacturing, we believe ACCO is well positioned to benefit if supply chain issues persist.Price Hikes. Overall, ACCO still has yet to recover inflationary cost increases and we anticipate additional targeted price increases throughout all markets during the year. ACCO took a sizable price increase in EMEA on April 1 and another price increase will be taken on July 1. Hopefully, these will offset cumulative inflationary pressures in that market.Cash Flow. As is typical for the first quarter, ACCO used $104.2 million of cash flow during the quarter, with a use of $107.6 million of free cash flow. We continue to expect the Company to generate approximately $190 million of cash flow from operations for the year, with free cash flow of $165 million.Updated Model. The solid 1Q22 performance and various favorable trends will be enough to more than offset headwinds, such as inflation and supply chain issues. A potential economic slowdown as the Federal Reserve raises rates could impact 2H22 results but as of yet is not impacting the business. We are maintaining our 2Q22 projections of revenue of $545 million and adjusted EPS of $0.44. Our full year estimates are for revenue of $2.1 billion and adjusted EPS of $1.60.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 7.5x 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 3.8% dividend yield while waiting for a full return to normalcy to pan out. Read More >>