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Here's Why You Should Retain National Vision (EYE) Stock Now
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National Vision Holdings, Inc. (EYE - Free Report) is well-poised to grow in the coming quarters, backed by the consistent market growth of the Owned and Host segments. The company’s strategic progress in terms of expanding exam capacity, recruitment and retention efforts and remote exam initiatives are highly encouraging. Further, it is also well-equipped to meet its short-term debt obligations.
However, the impact of the Walmart partnership termination remains concerning for National Vision’s operations. Excessive reliance on vendors also adds to the worry.
In the past year, this Zacks Rank #3 (Hold) stock has increased 32.6% compared with the 7.5% rise of the industry and 31.4% growth of the S&P 500 composite.
The leading optical retailer has a market capitalization of $1.78 billion. The company projects long-term estimated earnings growth of 14.5% compared with the industry’s 11.5%. National Vision surpassed estimates in each of the trailing four quarters, delivering an earnings surprise of 76.07%.
Let’s delve deeper.
Upsides
Owned & Host Gains Market Share: The company’s Owned and Host sub-segments are continuously gaining market share, driven by factors like diminishing eyesight with increasing age, causing new customers to buy corrective eyewear and a steady and consistent replacement cycle. America's Best and Eyeglass World are particularly driving revenues.
Image Source: Zacks Investment Research
National Vision opened 70 new stores in 2023, including 16 new America's Best and one Eyeglass World store in the fourth quarter. The company is also deploying remote medicine technology in tandem with electronic health record technology to drive expanded capacity, facilitate in-store efficiencies and improve patient experience. Store digitization efforts, such as the rollout of Electronic Health Records or EHR in America's Best locations, also continued to progress.
Future Strategies Look Promising: Throughout fiscal 2023, the company successfully expanded its exam capacity, achieving a second consecutive year of improved retention and a record year for recruiting more experienced student hires. In terms of store expansion, National Vision aims to open another 65 to 70 stores in 2024, a vast majority of which will be under the America's Best brand. The company is leveraging its omnichannel capabilities by testing and advancing programs that attract consumers across omnichannel offerings.
Further, National Vision is making efforts to rightsize both its store and overall cost structure through the digitization of stores and corporate offices to improve efficiency and productivity. The remote exam initiative is a key leveraging tool for the company amid the changing optometric landscape. Cost and pricing actions are expected to deliver annual savings of $10 million in 2024. Marketing also plays a crucial role in driving traffic to National Vision’s stores, given the infrequent purchase cycle for the overall business.
Favorable Solvency: National Vision exited the fourth quarter of 2023 with cash and cash equivalents of $149.9 million and $10 million in short-term debt payable. Long-term debt decreased to $451 million from $563 million at the end of 2023.
Downsides
Impact of the Legacy Business Termination: Effective Feb 23, 2024, National Vision no longer operates Vision Centers for Walmart. The company will also wind down its remaining AC Lens operations, including its Ohio distribution center, which largely supported the whole distribution and e-commerce contact lens services provided to Walmart and Sam’s Club. Together, this termination and the wind-down will possibly reduce National Vision’s revenues, profitability and cash flows, thus affecting its operational results and financial condition.
The transition period, including Walmart’s solicitation period, may also disrupt National Vision’s business operations, reducing sales and productivity and making it difficult to retain staff. This might lead to a significant increase in the costs to retain associates and optometrists during the mentioned period.
High Dependence on Vendors: National Vision procures almost all of its merchandise from domestic and international vendors. Moreover, the company has ties with a very limited number of suppliers for the majority of its eyeglass frames, eyeglass lenses and contact lenses. Thus, high dependence on a limited number of suppliers exposes it to the concentration of supplier risk. During fiscal 2023, 89% of contact lens expenditures were with one vendor, and 92% of lens expenditures were with three vendors.
Estimate Trend
The Zacks Consensus Estimate for National Vision’s 2024 earnings per share (EPS) has moved down to 54 cents from 57 cents in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $1.99 billion. This suggests a 6.7% fall from the year-ago reported number.
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 60% compared with the industry’s 17.4% rise in the past year.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.32% compared to the industry’s -0.12%. Shares of the company have increased 29.7% compared with the industry’s 7.5% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.9%. Shares of DVA have rallied 80.8% compared with the industry’s 25.1% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.
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Here's Why You Should Retain National Vision (EYE) Stock Now
National Vision Holdings, Inc. (EYE - Free Report) is well-poised to grow in the coming quarters, backed by the consistent market growth of the Owned and Host segments. The company’s strategic progress in terms of expanding exam capacity, recruitment and retention efforts and remote exam initiatives are highly encouraging. Further, it is also well-equipped to meet its short-term debt obligations.
However, the impact of the Walmart partnership termination remains concerning for National Vision’s operations. Excessive reliance on vendors also adds to the worry.
In the past year, this Zacks Rank #3 (Hold) stock has increased 32.6% compared with the 7.5% rise of the industry and 31.4% growth of the S&P 500 composite.
The leading optical retailer has a market capitalization of $1.78 billion. The company projects long-term estimated earnings growth of 14.5% compared with the industry’s 11.5%. National Vision surpassed estimates in each of the trailing four quarters, delivering an earnings surprise of 76.07%.
Let’s delve deeper.
Upsides
Owned & Host Gains Market Share: The company’s Owned and Host sub-segments are continuously gaining market share, driven by factors like diminishing eyesight with increasing age, causing new customers to buy corrective eyewear and a steady and consistent replacement cycle. America's Best and Eyeglass World are particularly driving revenues.
Image Source: Zacks Investment Research
National Vision opened 70 new stores in 2023, including 16 new America's Best and one Eyeglass World store in the fourth quarter. The company is also deploying remote medicine technology in tandem with electronic health record technology to drive expanded capacity, facilitate in-store efficiencies and improve patient experience. Store digitization efforts, such as the rollout of Electronic Health Records or EHR in America's Best locations, also continued to progress.
Future Strategies Look Promising: Throughout fiscal 2023, the company successfully expanded its exam capacity, achieving a second consecutive year of improved retention and a record year for recruiting more experienced student hires. In terms of store expansion, National Vision aims to open another 65 to 70 stores in 2024, a vast majority of which will be under the America's Best brand. The company is leveraging its omnichannel capabilities by testing and advancing programs that attract consumers across omnichannel offerings.
Further, National Vision is making efforts to rightsize both its store and overall cost structure through the digitization of stores and corporate offices to improve efficiency and productivity. The remote exam initiative is a key leveraging tool for the company amid the changing optometric landscape. Cost and pricing actions are expected to deliver annual savings of $10 million in 2024. Marketing also plays a crucial role in driving traffic to National Vision’s stores, given the infrequent purchase cycle for the overall business.
Favorable Solvency: National Vision exited the fourth quarter of 2023 with cash and cash equivalents of $149.9 million and $10 million in short-term debt payable. Long-term debt decreased to $451 million from $563 million at the end of 2023.
Downsides
Impact of the Legacy Business Termination: Effective Feb 23, 2024, National Vision no longer operates Vision Centers for Walmart. The company will also wind down its remaining AC Lens operations, including its Ohio distribution center, which largely supported the whole distribution and e-commerce contact lens services provided to Walmart and Sam’s Club. Together, this termination and the wind-down will possibly reduce National Vision’s revenues, profitability and cash flows, thus affecting its operational results and financial condition.
The transition period, including Walmart’s solicitation period, may also disrupt National Vision’s business operations, reducing sales and productivity and making it difficult to retain staff. This might lead to a significant increase in the costs to retain associates and optometrists during the mentioned period.
High Dependence on Vendors: National Vision procures almost all of its merchandise from domestic and international vendors. Moreover, the company has ties with a very limited number of suppliers for the majority of its eyeglass frames, eyeglass lenses and contact lenses. Thus, high dependence on a limited number of suppliers exposes it to the concentration of supplier risk. During fiscal 2023, 89% of contact lens expenditures were with one vendor, and 92% of lens expenditures were with three vendors.
Estimate Trend
The Zacks Consensus Estimate for National Vision’s 2024 earnings per share (EPS) has moved down to 54 cents from 57 cents in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $1.99 billion. This suggests a 6.7% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Cardinal Health (CAH - Free Report) , Stryker (SYK - Free Report) and DaVita (DVA - Free Report) .
Cardinal Health has a long-term estimated earnings growth rate of 14.2% compared with the industry’s 11.6%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 60% compared with the industry’s 17.4% rise in the past year.
CAH carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.32% compared to the industry’s -0.12%. Shares of the company have increased 29.7% compared with the industry’s 7.5% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, sporting a Zacks Rank #1 at present, has an estimated long-term earnings growth rate of 12.1% compared with the industry’s 11.9%. Shares of DVA have rallied 80.8% compared with the industry’s 25.1% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. In the last reported quarter, it delivered an average earnings surprise of 22.2%.