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Alcon (ALC) Q2 Earnings Top Estimates, 2021 Guidance Up

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Alcon Inc. (ALC - Free Report) delivered core earnings per share (EPS) of 56 cents for the second quarter of 2021 as against loss per share of 21 cents a year ago. The figure exceeded the Zacks Consensus Estimate by 30.3%. Alcon’s “core” results are non-IFRS (International Financial Reporting Standards) measures.

Second-quarter reported EPS of 31 cents came in contrast to loss per share of 86 cents in the year-earlier quarter.

Revenues in Detail

Revenues in the second quarter totaled $2.09 billion, beating the Zacks Consensus Estimate by 6.7%. The top line improved 74.8% from the year-ago number (up 69% at constant exchange rate or CER). Each of the company’s reporting segments benefited from the improvements in the eye care market, led by strong recovery in the United States and varied paces of recovery in international markets from the COVID-19 pandemic.

In the second quarter, Total Surgical (consisting of Implantables, Consumables and Equipment/other) reported sales of $1.21 billion, up 100% on a reported basis (up 94% at CER).

ALCON INC Price, Consensus and EPS Surprise

ALCON INC Price, Consensus and EPS Surprise

ALCON INC price-consensus-eps-surprise-chart | ALCON INC Quote

Total Vision Care (comprising Contact lenses and Ocular health) reported sales of $888 million, up 49% year over year (up 44% at CER). In the quarter, Vision Care returned to growth on strong demand for Precision1, Systane and Pataday.

Margins

Cost of net sales in the quarter was $875 million, up 2.5% year over year. Adjusted gross profit (net sales to third parties less cost of net sales) improved 254.4% to $1.22 billion in the reported quarter. Adjusted gross margin expanded 2950 basis points (bps) to 58.2% in the second quarter of 2021.

Company-provided operating margin was 10.9% as against (38.9%) in the year-ago period. The quarter’s core operating margin was 18.2%, a significant improvement from the year-ago negative operating margin of 6.6%.

Financial Position

Alcon exited the second quarter of 2021 with cash and cash equivalents of $1.37 billion compared with $1.56 billion at the end of the first quarter.

Cumulative net cash flow from operating activities at the end of the second quarter was $542 million compared with $58 million a year ago. For the same period, free cash flow was $320 million as against free cash outflow of $110 million a year ago.

2021 View Raised

Assuming global markets to return to 2019 levels (pre pandemic) at the end of 2021, Alcon updated its guidance for the year.

Net revenues are expected in the range of $8.0-$8.2 billion (an improvement from the previously-announced view of $7.8-$8.0 billion). The Zacks Consensus Estimate for the same is currently pegged at $7.93 billion.

The core EPS estimate guidance has also been raised to the band of $2.00-$2.10 (from the previous guided range of $1.85-$1.95). The Zacks Consensus Estimate for the same is currently pegged at $1.91.

Our Take

Alcon reported better-than-expected results for second-quarter 2021. This quarter marked the highest quarterly sales and earnings since the company’s spin-off. Strong commercial execution related to the company’s product launches resulted in growth across all sales categories in Surgical and Vision Care over 2019. Margin improvements and raised 2021 guidance buoy optimism.

The company currently assumes that the U.S. market will continue to grow relative to 2019 in the second half of 2021 and that international markets will return to 2019 levels early next year.

Zacks Rank and Key Picks

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) .

Encompass Health, sporting a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. It currently carries a Zacks Rank #2 (Buy).

Bio-Rad reported second-quarter 2021 adjusted EPS of $3.54, surpassing the Zacks Consensus Estimate by 86.3%. Revenues of $715.9 million surpassed the Zacks Consensus Estimate by 17.3%. It currently carries a Zacks Rank #2.

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