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Why Is National Vision (EYE) Down 5.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for National Vision (EYE - Free Report) . Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is National Vision due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

National Vision Q3 Earnings Beat Estimates, Margins Expand

National Vision delivered adjusted earnings per share of 54 cents for the third quarter of 2020, a significant rise of 16 cents from the prior-year quarter. The figure exceeded the Zacks Consensus Estimate by 107.7%.

The adjustment excludes the impact of certain non-recurring charges like asset impairment, amortization of acquisition intangibles, and amortization of debt discount and deferred financing costs, among others.

GAAP earnings per share for the quarter were 42 cents a share compared to a penny in the year-earlier quarter.

Revenues in Detail

Revenues in the third quarter totaled $485.4 million, beating the Zacks Consensus Estimate by 1.5%. The top line improved 4% from the year-ago number. The company noted that the impact from the timing of unearned revenues on net revenues and profitability was immaterial.

In the third quarter, comparable store sales growth was 11.6% (adjusted Comparable Store Sales Growth was 12.4%).

Comparable store sales declined 44.7% in the reported quarter (adjusted comparable store sales growth was down 36.5%) due to the temporary closure of stores.

National Vision opened 18 new stores in third-quarter 2020 and closed one store to reach 1,201 stores at the end of the third quarter. Overall, store count grew 4.9% year over year.

Margins

Gross profit in the reported quarter was $274.5 million, up 20.7% from the prior-year quarter. Gross margin of 56.6% expanded 392 basis points (bps).

Meanwhile, selling, general and administrative expenses increased a marginal 0.1% to $190.5 million. Adjusted operating margin was 17.3%, implying an 872-bps expansion year over year.

Financial Position

National Vision exited the third quarter with cash and cash equivalents of $377 million compared with $256.3 million at the end of the second quarter.

Cumulative net cash flow from operating activities at the end of the third quarter was $203.7 million compared with $170.9 million a year ago.

2020 Outlook

For the fourth quarter of 2020, net revenues are expected in the range of $460-$475 million. Adjusted earnings per share is projected in the band of 10-14 cents.

The company also provided its 2021 guidance. Net revenues are expected in the range of $1.68 - $1.69 billion. Adjusted earnings per share is projected in the band of 53-57 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 66.67% due to these changes.

VGM Scores

Currently, National Vision has a great Growth Score of A, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, National Vision has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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