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Alcon's (ALC) Q4 Earnings Top Estimates, Margins Increase

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Alcon Inc. (ALC - Free Report) delivered core earnings per share (EPS) of 56 cents for the fourth quarter of 2021, which marked a 36.6% surge from the year-ago figure. The figure also exceeded the Zacks Consensus Estimate by 14.3%. Alcon’s “core” results are based on non-IFRS (International Financial Reporting Standards) measures.

Fourth-quarter reported EPS was 28 cents, up 47.4% from the year-earlier quarter.

For the full year, core EPS was $2.15, beating the Zacks Consensus Estimate by 2.9% and marking a 106.7% surge from the year-ago period.

Revenues in Detail

Alcon’s net sales to third parties in the fourth quarter were $2.13 billion, which beat the Zacks Consensus Estimate by 2.7%. The top line improved 10.9% from the year-ago number (up 13% at constant exchange rate or CER). The company reported year-over-year growth across all sales categories in Surgical and Vision Care.

For 2021, net sales were $8.22 billion, up 21.6% from 2020 and 0.6% ahead of the Zacks Consensus Estimate.

In the fourth quarter, Total Surgical (consisting of Implantables, Consumables and Equipment/other) recorded sales of $1.25 billion, up 12% on a reported basis (up 14% at CER). Alcon registered Implantables growth, driven by the ongoing adoption of advanced technology intraocular lenses, led by the launch of Vivity. Consumables growth primarily reflected market improvements from the year-ago period. Equipment/other grew on the rising demand for cataract equipment.

Alcon Price, Consensus and EPS Surprise

Alcon Price, Consensus and EPS Surprise

Alcon price-consensus-eps-surprise-chart | Alcon Quote

 

Total Vision Care (comprising Contact lenses and Ocular health) reported sales of $875 million, up 10% year over year (up 12% at CER). In the quarter, growth was driven by silicone hydrogel (SiHy) contact lenses, including Precision1, Precision1 for Astigmatism and Dailies Total1, and continuing recovery in international markets.

Margins

The cost of net sales in the quarter was $930 million, down 11.6% year over year. Adjusted gross profit (net sales to third parties less cost of net sales) improved 37.9% to $1.24 billion in the reported quarter. Adjusted gross margin expanded 1107 basis points (bps) to 56.4% in the fourth quarter of 2021.

The core operating margin, according to Alcon, was 16.3% in the quarter. In the year-ago period, the company had reported a core operating margin of 7.3%.

Financial Position

Alcon exited 2021 with cash and cash equivalents of $1.58 billion compared with $1.56 billion at the end of 2020.

Cumulative net cash flow from operating activities at the end of 2021 was $1.35 billion compared with $823 million a year ago. For the same period, free cash flow was $645 million compared with $350 million a year ago.

2022 View Initiated

Alcon initiated its 2022 guidance, assuming markets to grow over 2021 and in line with historical averages. Further, the company assumes that the impact of inflation will moderate in the second half of 2022. The exchange rates as of mid-January 2022 are expected to prevail through year-end.

The company expects to report net sales in the range of $8.7-$8.9 billion (indicating growth of 7% to 9% at CER over 2021) and core earnings per share in the range of $2.35 to $2.45 (growth of 13% to 18%). The Zacks Consensus Estimate for ALC’s earnings is currently pegged at $2.38 per share while the same for revenues is pegged at $8.68 billion.

Our Take

Alcon reported better-than-expected results for fourth-quarter 2021. The company reported year-over-year growth across all sales categories in Surgical and Vision Care. The margin improvements buoy optimism. According to the company, strong product flow resulted in revenue growth above the market, which drove core operating leverage and margin expansion.

The company’s 2022 guidance with strong growth projections over 2021 buoys optimism.

Zacks Rank and Key Picks

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are GlaxoSmithKline plc (GSK - Free Report) , Molina Healthcare, Inc. (MOH - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GlaxoSmithKline, carrying a Zacks Rank #2 (Buy), reported fourth-quarter 2021 adjusted earnings of 69 cents per American depositary share (“ADS”), which beat the Zacks Consensus Estimate by 9.5%. Revenues of $13 billion outpaced the consensus mark by 3%.

GlaxoSmithKline has an estimated long-term growth rate of 5.6%. GSK surpassed estimates in three of the trailing four quarters, the average surprise being 20.5%.

Molina Healthcare reported fourth-quarter 2021 adjusted EPS of $2.88, which surpassed the Zacks Consensus Estimate by 2.1%. Fourth-quarter revenues of $7.41 billion outpaced the Zacks Consensus Estimate by 3.9%. It currently carries a Zacks Rank #2.

Molina Healthcare has an estimated long-term growth rate of 18.8%. MOH surpassed estimates in three of the trailing four quarters, the average surprise being 5%.

Bio-Rad reported fourth-quarter 2021 adjusted EPS of $3.21, which surpassed the Zacks Consensus Estimate by 11.9%. Fourth-quarter revenues of $732.8 million outpaced the Zacks Consensus Estimate by 0.5%. It currently has a Zacks Rank #2.

Bio-Rad has an earnings yield of 2.3%, which compares favorably with the industry’s negative yield. BIO surpassed estimates in the trailing four quarters, the average surprise being 66.9%.