National Vision Holdings, Inc. ( EYE Quick Quote EYE - Free Report) is likely to gain in the coming quarters, backed by impressive adjusted comparable store sales growth. The company is progressing in its initiatives toward the improvement of exam capacity, including deploying remote medicine capabilities. Investing in AI start-ups like Toku fortifies the future of optical care, enabling people to have affordable access to potentially life-saving health data in an easily accessible, non-invasive test.
Meanwhile, escalated expenses and operating in a highly competitive space appear worrisome for National Vision.
In the past year, this Zacks Rank #3 (Hold) stock has declined 33.4% compared with the 4.3% fall of the
industry and a 9.5% rise of the S&P 500 composite.
The leading optical retailer has a market capitalization of $1.62 billion. The company projects long-term estimated earnings growth of 21.9% compared with the industry’s 14.1%. National Vision surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an earnings surprise of 69.9%, on average.
Let’s delve deeper.
Upsides Future Strategies Look Promising: In terms of store expansion, National Vision continues to see a sizable new opportunity with growth for many years to come. The company’s planned store openings of approximately 65 to 70 new stores in 2023 remain on track, having opened eight new stores in the first quarter.
National Vision continued to execute initiatives to thrive in the post-pandemic new normal business environment toward improved sales and profitability. The company’s retention, recruitment and remote medicine efforts are likely to deliver an improved exam capacity.
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In addition, the digitization of stores, corporate offices and marketing efforts are expected to drive productivity improvements. Investments in improved patient care and optometric experience, including investments in AI, are expected to pay off in the long term.
National Vision’s merchandising and distribution teams continue to execute well and are confident that the current inventory levels are sufficient to support continued growth in 2023. Overall, the company continues to utilize its strong balance sheet and cash flow to invest in strategic initiatives to enhance customer experience and strengthen its market position.
Technological Investments: National Vision recently invested in an early-stage healthcare, AI start-up, Toku, alongside Topcon Healthcare. Through the investment, EYE is strengthening the future of optical care in which more people are able to have affordable access to potentially life-saving health data on an easily accessible, non-invasive test. A Bullish First-Quarter Performance: In the last reported quarter, National Vision delivered better-than-expected revenues and earnings. Amid an uncertain macro environment, National Vision delivered positive comparable sales growth in the first quarter, primarily driven by strength in its managed care business.
During the quarter, National Vision opened four new America's Best and four Eyeglass World stores. The combined unit growth of America's Best and Eyeglass World brands increased 5% over the total store base last year, having ended the quarter with 1,357 stores.
Further, the company is also continuing to roll out its remote care capabilities, which provide doctors with additional levels of flexibility and expand exam capacity in many areas. Per the company’s first-quarter update, it is on track with the expansion into at least an additional 200 remote-enabled stores in 2023.
Downsides Mounting Expenses: EYE reported a significant year-over-year decline in first-quarter earnings. Escalating expenses caused a contraction in the gross and adjusted operating margins. The company is facing demand headwinds across its network of stores, given the current macro environment and supply challenges in a smaller subgroup of stores due to constraints on eye exam capacity. Tough Competition: National Vision operates in a highly competitive optical retail industry. Companies within the industry generally compete based on the recognition of the brand name, price, convenience, selection, service and product quality. National Vision competes with national retailers like LensCrafters, Pearle Vision and Visionworks in the broader optical retail industry.
Competition exists in physical retail locations along with e-commerce platforms. The company also faces a competitive threat from online sellers of contact lenses and eyewear. Many firms are focused on selling eyeglasses in the online market like Warby Parker and Zenni Optical.
The Zacks Consensus Estimate for EYE’s 2023 earnings per share (EPS) has moved up from 50 cents to 55 cents in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $2.12 billion. This suggests a 5.6% rise from the year-ago reported number.
Some better-ranked stocks in the broader medical space are
Haemonetics ( HAE Quick Quote HAE - Free Report) , DexCom ( DXCM Quick Quote DXCM - Free Report) and Intuitive Surgical ( ISRG Quick Quote ISRG - Free Report) .
Haemonetics has an earnings yield of 3.98% against the industry’s -3.24%. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have risen 33.7% against the industry’s 4.3% decline in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
DexCom, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 42.9% compared with the industry’s 15.9%. Shares of the company have rallied 30.6% against the industry’s 2.1% decline over the past year.
DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 28.83%.
Intuitive Surgical, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 15.7%, almost in line with the industry. Shares of ISRG have risen 30.6% against the industry’s 2.1% fall over the past year.
ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average surprise being 4.19%.