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Alcon (ALC) Hits 52-Week High: What's Driving the Stock?
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Shares of Alcon Inc. (ALC - Free Report) scaled a new 52-week high of $83.89 on Jul 11, before closing the session slightly lower at $83.78.
In the past year, this Zacks Rank #2 (Buy) stock has gained 19% compared with the 15.4% rise of the industry. The S&P 500 has witnessed a 18.5% growth in the said time frame.
The company’s long-term expected growth rate of 14.9%. DaVita’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and break-even in one, the average surprise being 8.9%.
Alcon is witnessing an upward trend in its stock price, prompted by solid demand, strong commercial execution and pricing improvements across the Surgical and Vision Care franchises. The upbeat guidance for 2023 is encouraging. However, escalated costs and a tough competitive space do not bode well for Alcon.
Let’s delve deeper.
Key Growth Drivers
Surgical Business Grows: In the first quarter, Total Surgical (consisting of implantables, consumables and equipment/other) recorded sales growth of 8% at CER. Within Implantables, excluding the impact from Korea, sales were up nearly 5% on a reported basis and approximately 9% on a constant-currency basis. The company continued with its ATIOL market leadership for another quarter with approximately half of the global market and two thirds of the U.S. market, despite increasing competitive activity. In consumables, first-quarter sales were up 13%, driven by favorable market conditions and pricing. In equipment, sales were up 14% year over year on continued strong demand for cataract and Vit-Ret devices, particularly in international markets as the company upgraded and expanded its installed base.
Vision Care Returns to Growth: Total Vision Care (comprising contact lenses and ocular health) reported sales grew 16% year over year at CER. The upside includes approximately 5 points contribution from the ophthalmic pharmaceutical products the company acquired in 2022.
Image Source: Zacks Investment Research
Net sales of contact lenses increased 10% at CER. Sales were led by continued growth in silicone hydrogel contact lenses, including the Precision1 and Total product families and price increases.
Upbeat Guidance: The company maintained its net sales projection in the range of $9.2-$9.4 billion, indicating growth of 6-8% at CER from 2022. The Zacks Consensus Estimate for ALC’s revenues is pegged at $9.24 billion.
Alcon raised its projection of core earnings per share in the range of $2.55-$2.65, suggesting growth of 20-24% at CER over 2022. The Zacks Consensus Estimate for ALC’s earnings is currently pegged at $2.59 per share.
Downsides
Cost Pressure Remains: The cost of net sales in the quarter was up 6.5% year over year. The core operating margin was 14.2% in the quarter, contracting 14 bps year over year at CER. The company’s operating margin in the quarter was impacted by an unfavorable product mix from lower PCIOL sales in South Korea, higher R&D investment following the acquisition of Aerie and a negative 1.3% impact from currency.
Tough Competitive Landscape: The ophthalmology industry is highly competitive. In both surgical and vision care businesses, Alcon faces intense competition. In the surgical business, Alcon faces a mixture of competitors, ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Health Equity, Inc. (HQY - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Hologic, carrying a Zacks Rank #2 at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 15.4% compared with the industry’s 12.5% rise in the past year.
HealthEquity, sporting a Zacks Rank #1 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 9.1%.
HealthEquity has gained 12.7% against the industry’s 12.5% decline in the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 42.6% against the industry’s 19.8% decline in the past year.
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Alcon (ALC) Hits 52-Week High: What's Driving the Stock?
Shares of Alcon Inc. (ALC - Free Report) scaled a new 52-week high of $83.89 on Jul 11, before closing the session slightly lower at $83.78.
In the past year, this Zacks Rank #2 (Buy) stock has gained 19% compared with the 15.4% rise of the industry. The S&P 500 has witnessed a 18.5% growth in the said time frame.
The company’s long-term expected growth rate of 14.9%. DaVita’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and break-even in one, the average surprise being 8.9%.
Alcon is witnessing an upward trend in its stock price, prompted by solid demand, strong commercial execution and pricing improvements across the Surgical and Vision Care franchises. The upbeat guidance for 2023 is encouraging. However, escalated costs and a tough competitive space do not bode well for Alcon.
Let’s delve deeper.
Key Growth Drivers
Surgical Business Grows: In the first quarter, Total Surgical (consisting of implantables, consumables and equipment/other) recorded sales growth of 8% at CER. Within Implantables, excluding the impact from Korea, sales were up nearly 5% on a reported basis and approximately 9% on a constant-currency basis. The company continued with its ATIOL market leadership for another quarter with approximately half of the global market and two thirds of the U.S. market, despite increasing competitive activity. In consumables, first-quarter sales were up 13%, driven by favorable market conditions and pricing. In equipment, sales were up 14% year over year on continued strong demand for cataract and Vit-Ret devices, particularly in international markets as the company upgraded and expanded its installed base.
Vision Care Returns to Growth: Total Vision Care (comprising contact lenses and ocular health) reported sales grew 16% year over year at CER. The upside includes approximately 5 points contribution from the ophthalmic pharmaceutical products the company acquired in 2022.
Net sales of contact lenses increased 10% at CER. Sales were led by continued growth in silicone hydrogel contact lenses, including the Precision1 and Total product families and price increases.
Upbeat Guidance: The company maintained its net sales projection in the range of $9.2-$9.4 billion, indicating growth of 6-8% at CER from 2022. The Zacks Consensus Estimate for ALC’s revenues is pegged at $9.24 billion.
Alcon raised its projection of core earnings per share in the range of $2.55-$2.65, suggesting growth of 20-24% at CER over 2022. The Zacks Consensus Estimate for ALC’s earnings is currently pegged at $2.59 per share.
Downsides
Cost Pressure Remains: The cost of net sales in the quarter was up 6.5% year over year. The core operating margin was 14.2% in the quarter, contracting 14 bps year over year at CER. The company’s operating margin in the quarter was impacted by an unfavorable product mix from lower PCIOL sales in South Korea, higher R&D investment following the acquisition of Aerie and a negative 1.3% impact from currency.
Tough Competitive Landscape: The ophthalmology industry is highly competitive. In both surgical and vision care businesses, Alcon faces intense competition. In the surgical business, Alcon faces a mixture of competitors, ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Health Equity, Inc. (HQY - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Hologic, carrying a Zacks Rank #2 at present, has an estimated growth rate of 5.1% for fiscal 2024. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average being 27.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 15.4% compared with the industry’s 12.5% rise in the past year.
HealthEquity, sporting a Zacks Rank #1 at present, has an estimated long-term growth rate of 22%. HQY’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 9.1%.
HealthEquity has gained 12.7% against the industry’s 12.5% decline in the past year.
Boston Scientific, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.5%. BSX’s earnings surpassed estimates in two of the trailing four quarters and missed in the other two, the average surprise being 1.9%.
Boston Scientific has gained 42.6% against the industry’s 19.8% decline in the past year.