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Here's Why Investors Should Buy Alcon (ALC) Stock Right Now
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Alcon (ALC - Free Report) is well-poised for growth in the coming quarters, backed by the encouraging performance of the Surgical business. Strength in contact lenses and ocular health business is highly optimistic for the Vision Care segment. Further, a sound financial position bodes well for the stock.
Meanwhile, macroeconomic challenges and the adverse effects of intense competition remain concerning for the company.
In the past year, this Zacks Rank #2 (Buy) stock has increased 13.7% against the 13.3% fall of the industry and an 11.2% rise of the S&P 500 composite.
The renowned pharmaceutical and medical device manufacturer has a market capitalization of $35.94 billion. Alcon projects a long-term estimated earnings growth rate of 14.9% compared with 13.9% of the industry. ALC’s earnings surpassed estimates in three of the trailing four quarters and were breakeven in one, delivering an average surprise of 8.03%.
Let’s delve deeper.
Upsides
Surgical Business Ascends: Alcon’s Surgical business continues to gain from the company’s diverse portfolio and incremental innovation. In Implantables, excluding the impact of the Korea PCIOL reimbursement change, the company is seeing strong growth, banking on the Vivity rollout in select international markets, including Japan and Canada. With Vivity and PanOptix, Alcon currently continues to lead the ATIOL category in the United States and international market.
In the second quarter, Alcon remained encouraged by the resilience of global ATIOL penetration, which was up 80 basis points year over year and up 60 basis points sequentially, primarily driven by strength in international markets.
Image Source: Zacks Investment Research
Vision Care Returns to Growth: Within this segment, Alcon is registering solid growth, banking on strong sales of its contact lenses and ocular health products. In contact lenses, the company is successfully executing its strategy of investing in fast-growing market segments where it has significant share opportunities.
Within reusable lenses, TOTAL30 and TOTAL30 for astigmatism are witnessing strong market acceptance. In terms of Daily Lenses, the company is benefiting from the strong performance of Toric lenses, including Precision1 and DAILIES TOTAL1 Toric. In Ocular health, SYSTANE and Pataday are particularly registering strong growth.
Stable Solvency Structure: Alcon exited the second quarter with cash and cash equivalents of $0.66 billion against the corresponding short-term payable debt of $100 million. This is an indication of favorable solvency. The total debt was $4.68 billion compared with $4.69 billion at the end of the first quarter.Moreover, the company’s second-quarter interest coverage stood at 4.2%, sequentially up from the first-quarter interest coverage of 4.1%.
Downsides
Macroeconomic Pressure Persists: Alcon is experiencing inflationary pressures and supply-chain challenges, which are likely to continue throughout 2023. The cost of net sales in the second quarter was up 4.1% year over year. Selling, general and administration expenses rose 3.6% year over year.
A Tough Competitive Landscape: With the ophthalmology industry being highly competitive, Alcon faces intense competition in the Surgical and Vision Care businesses. In the Surgical business, the mixture of competitors ranges from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. ALC also faces competition from the providers of alternative medical therapies such as pharmaceutical companies that have the potential to disrupt the core elements of its business.
Estimate Trend
The Zacks Consensus Estimate for Alcon’s 2023 earnings per share has remained constant at $2.75 in the past 60 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $9.48 billion. This suggests a 9.5% rise from the year-ago reported number.
Haemonetics has an estimated earnings growth rate of 27.1% for fiscal 2024 compared with the industry’s 17.2%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 11.1% against the industry’s 11.5% fall in the past year.
Insulet, sporting a Zacks Rank #1 at present, has a long-term estimated earnings growth rate of 41.5% compared with the industry’s 12.2%. Shares of the company have decreased 46.5% compared with the industry’s 11.5% decline over the past year.
PODD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 126.9%. In the last reported quarter, it delivered an average earnings surprise of 58.3%.
DexCom, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 33.6% compared with the industry’s 14.3%. Shares of DXCM have fallen 15.4% compared with the industry’s 13.3% decline over the past year.
DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%. In the last reported quarter, it delivered an average earnings surprise of 47.1%.
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Here's Why Investors Should Buy Alcon (ALC) Stock Right Now
Alcon (ALC - Free Report) is well-poised for growth in the coming quarters, backed by the encouraging performance of the Surgical business. Strength in contact lenses and ocular health business is highly optimistic for the Vision Care segment. Further, a sound financial position bodes well for the stock.
Meanwhile, macroeconomic challenges and the adverse effects of intense competition remain concerning for the company.
In the past year, this Zacks Rank #2 (Buy) stock has increased 13.7% against the 13.3% fall of the industry and an 11.2% rise of the S&P 500 composite.
The renowned pharmaceutical and medical device manufacturer has a market capitalization of $35.94 billion. Alcon projects a long-term estimated earnings growth rate of 14.9% compared with 13.9% of the industry. ALC’s earnings surpassed estimates in three of the trailing four quarters and were breakeven in one, delivering an average surprise of 8.03%.
Let’s delve deeper.
Upsides
Surgical Business Ascends: Alcon’s Surgical business continues to gain from the company’s diverse portfolio and incremental innovation. In Implantables, excluding the impact of the Korea PCIOL reimbursement change, the company is seeing strong growth, banking on the Vivity rollout in select international markets, including Japan and Canada. With Vivity and PanOptix, Alcon currently continues to lead the ATIOL category in the United States and international market.
In the second quarter, Alcon remained encouraged by the resilience of global ATIOL penetration, which was up 80 basis points year over year and up 60 basis points sequentially, primarily driven by strength in international markets.
Image Source: Zacks Investment Research
Vision Care Returns to Growth: Within this segment, Alcon is registering solid growth, banking on strong sales of its contact lenses and ocular health products. In contact lenses, the company is successfully executing its strategy of investing in fast-growing market segments where it has significant share opportunities.
Within reusable lenses, TOTAL30 and TOTAL30 for astigmatism are witnessing strong market acceptance. In terms of Daily Lenses, the company is benefiting from the strong performance of Toric lenses, including Precision1 and DAILIES TOTAL1 Toric. In Ocular health, SYSTANE and Pataday are particularly registering strong growth.
Stable Solvency Structure: Alcon exited the second quarter with cash and cash equivalents of $0.66 billion against the corresponding short-term payable debt of $100 million. This is an indication of favorable solvency. The total debt was $4.68 billion compared with $4.69 billion at the end of the first quarter.Moreover, the company’s second-quarter interest coverage stood at 4.2%, sequentially up from the first-quarter interest coverage of 4.1%.
Downsides
Macroeconomic Pressure Persists: Alcon is experiencing inflationary pressures and supply-chain challenges, which are likely to continue throughout 2023. The cost of net sales in the second quarter was up 4.1% year over year. Selling, general and administration expenses rose 3.6% year over year.
A Tough Competitive Landscape: With the ophthalmology industry being highly competitive, Alcon faces intense competition in the Surgical and Vision Care businesses. In the Surgical business, the mixture of competitors ranges from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. ALC also faces competition from the providers of alternative medical therapies such as pharmaceutical companies that have the potential to disrupt the core elements of its business.
Estimate Trend
The Zacks Consensus Estimate for Alcon’s 2023 earnings per share has remained constant at $2.75 in the past 60 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $9.48 billion. This suggests a 9.5% rise from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Haemonetics (HAE - Free Report) , Insulet (PODD - Free Report) and DexCom (DXCM - Free Report) .
Haemonetics has an estimated earnings growth rate of 27.1% for fiscal 2024 compared with the industry’s 17.2%. HAE’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have rallied 11.1% against the industry’s 11.5% fall in the past year.
HAE carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Insulet, sporting a Zacks Rank #1 at present, has a long-term estimated earnings growth rate of 41.5% compared with the industry’s 12.2%. Shares of the company have decreased 46.5% compared with the industry’s 11.5% decline over the past year.
PODD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 126.9%. In the last reported quarter, it delivered an average earnings surprise of 58.3%.
DexCom, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 33.6% compared with the industry’s 14.3%. Shares of DXCM have fallen 15.4% compared with the industry’s 13.3% decline over the past year.
DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%. In the last reported quarter, it delivered an average earnings surprise of 47.1%.