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National Vision (EYE) Gains From Store Opening Amid Macro Woes

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National Vision (EYE - Free Report) continues to benefit from solid positive comps within the Owned & Host business. The impending contract loss with Walmart in 2024 is a cause for worry. The stock carries a Zacks Rank #3 (Hold).

Amid an uncertain macro environment, National Vision is delivering positive comparable sales growth, primarily driven by strength in its Owned & Host business. This business is gaining market share due to several growth drivers, including diminishing eyesight with increasing age. This causes new customers to buy corrective eyewear and a steady and consistent replacement cycle, as customers replace or purchase new eyewear for a variety of reasons, including changes in prescriptions, fashion trends and necessity. America’s Best and Eyeglass World are particularly driving revenues.

The company is expanding sales through the continued rollout of its remote medicine technology. National Vision noted that it is deploying remote medicine technology in tandem with electronic health record technology to drive expanded capacity, improve in-store efficiencies and improve the patient experience. The combination of these initiatives is resulting in added exam capacity in sales that the company would not have had otherwise.

National Vision plans to continue executing core growth initiatives and further investing in strengthening competitive advantages. In terms of store expansion, the company continues to see a sizable new opportunity with growth for many years to come. Despite many supply chain obstacles, National Vision opened eight new stores during the first quarter and is on track to open nearly 65 to 70 new stores in 2023. The company noted that the new stores opened over the past 12 months are continuing to perform well and in line with its expectations.

Per National Vision, marketing continues to be a key factor in driving traffic to its stores, given the infrequent purchase cycle for eyeglasses. In the current environment of high inflation, the company also noted that it continues to focus on marketing efficiency and is content to be leveraging marketing expenses this year.

On the flip side, National Vision noted that the impending termination of its long-term partnership with Walmart may significantly impact the company’s business. The transition period, including Walmart’s solicitation period under the agreements, may disrupt the business, including a reduction in sales, productivity and focus, and may make it harder to retain associates and optometrists. This, in turn, could adversely affect the company’s financial condition and results of operations.

Meanwhile, rising inflation is resulting in increased costs and expense pressure for National Vision. The company anticipates that pressures from increases in raw materials prices could have an impact on its costs applicable to revenues in 2023. Wage investments, as a result of inflation and an increasingly competitive recruiting market for vision care professionals due to the pandemic and related effects, have had, and may continue to have, an impact on its profitability.

Over the past year, shares of National Vision have plunged 56.3% compared with the industry’s 3.6% decline.

Key Picks

Some better-ranked stocks in the broader medical space are Haemonetics (HAE - Free Report) , Quanterix (QTRX - Free Report) and SiBone (SIBN - Free Report) . Each of these companies presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Haemonetics’ stock has risen 14.4% in the past year. Earnings estimates for Haemonetics have increased from $3.58 to $3.82 in 2023 and $3.98 to $4.07 in 2024 in the past 30 days.

HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 19.39%. In the last reported quarter, it posted an earnings surprise of 38.16%.

Estimates for Quanterix’s 2023 loss per share have narrowed from $1.16 to 97 cents in the past 30 days. Shares of the company have soared 149.6% in the past year against the industry’s decline of 5.3%.

QTRX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.

Estimates for SiBone’s 2023 loss have narrowed from $1.33 to $1.25 per share in the past 30 days. Shares of the company have gained 21.9% in the past year compared with the industry’s rise of 3.3%.

SIBN’s earnings beat estimates in all the trailing four quarters, the average surprise being 20.37%. In the last reported quarter, SiBone delivered an earnings surprise of 26.83%.

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