Consumer and education products manufacturer Acco Brands (ACCO -0.41%) beat fourth-quarter expectations, but the company's guidance for 2024 underwhelmed. Investors appear disappointed, sending Acco shares down 12% as of 2 p.m. ET Friday.
A tough environment takes its toll
Acco is a supplier of branded academic, consumer, and business products, including Mead paper, Swingline staplers, Kensington locks, and At-A-Glance planners. The company earned $0.39 per share in the quarter on sales of $488.6 million, surpassing Wall Street's estimate of $0.33 per share in earnings on $476 million in revenue.
But the trends tell a more troubling story. Fourth-quarter sales fell by 2.2% year over year, and 5.9% for the year. Acco in its release said the declines "reflect the challenging macroeconomic environment" as well as "lower than anticipated return to office trends" and tight inventory management by retailers.
The company is not expecting conditions to improve overnight. Acco forecasted 2024 sales to be down 2% to 5% and first-quarter earnings of between $0.01 and $0.04 per share. Wall Street had predicted $0.08 per share in earnings in the current quarter.
Is Acco Brands a buy after its weak report?
The company is not sitting around waiting for economic conditions to improve. On Jan. 30, Acco announced a multiyear restructuring program designed to cut annual costs by at least $60 million. The company is shedding plants and reducing headcount to get costs in line with business trends.
There are some silver linings in the report. Acco managed to improve gross margin by 420 basis points in 2023, despite revenue declines, and operating cash flow for the year improved by $51 million to $128.7 million.
Following Friday's decline, investors buying in today would get a dividend yielding 5.42% to wait for a turnaround. There are a lot of risks embedded in the stock, including continued questions about the post-pandemic office and work environment, but post-earnings Acco appears to at least offer a better value proposition to prospective investors.