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National Vision (EYE) Tops Q2 Earnings, Lowers '24 Outlook

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National Vision Holdings, Inc. (EYE - Free Report) delivered an adjusted EPS (earnings per share) of 15 cents in the second quarter of 2024 compared with 17 cents in the year-ago period. The figure surpassed the Zacks Consensus Estimate of 6 cents.

The GAAP loss from continuing operations was 1 cent per share compared to an EPS of 5 cents in the prior-year quarter.

Revenues in Detail

On Feb 23, 2024, National Vision completed the termination of the Walmart Management and Services Agreement and discontinued the former Legacy reportable segment. During the second quarter of 2024, the company wound down its remaining AC Lens operations, including the closure of its Ohio distribution center. Following this development, Walmart stores and AC Lens operations are now accounted for in discontinued operations.

As of Jun 29, 2024, the company’s operations consisted of one reportable segment, Owned & Host.

Net revenues from continuing operations in the second quarter totaled $451.7 million, which missed the Zacks Consensus Estimate by 2.8%.

The top line rose 4.6% from the year-ago quarter’s number, primarily driven by growth from new store sales and Adjusted Comparable Store Sales Growth, partially offset by the effect of converted and closed stores.

In the second quarter, comparable store sales growth was 2.2% year over year. Adjusted comparable store sales growth was 2.4%. National Vision opened 17 new stores and ended the period with 1,216 stores. Overall, the store count rose 5.6% year over year.

Margins

On a consolidated basis, the gross profit in the second quarter rose 2.7% from the prior-year quarter’s level to $258.2 million. Yet, the gross margin contracted 109 basis points (bps) due to a 7.4% rise in the cost of revenues (comprising products, services and plans).

SG&A expenses rose 3.8% year over year to $231.4 million. The adjusted operating margin was 5.9%, which contracted 68 bps year over year.

Financial Position

National Vision exited the second quarter with cash and cash equivalents of $150.1 million compared with $149.9 million at the end of 2023.

The cumulative net cash flow from operating activities at the end of the quarter was $23.9 million compared with $74.1 million a year ago.

2024 Outlook

National Vision provided an updated outlook for 2024 for the 52 weeks ending Dec 28, 2024.

Full-year net revenues are expected in the range of $1.820-$1.840 billion (earlier $1.965-$2.005 billion). The Zacks Consensus Estimate for fiscal 2024 revenues currently stands at $1.93 billion.

Adjusted comparable store sales are expected to grow 0.5%-1.5% (previously 2%-4%). Adjusted EPS is estimated in the band of 45-50 cents (earlier 50-65 cents). The Zacks Consensus Estimate for the same is currently pegged at 53 cents.

Our Take

National Vision delivered better-than-expected earnings in the second quarter of 2024, while revenues missed estimates. The contraction of both margins during the quarter is discouraging. The company’s revised 2024 guidance takes into account the current and potential impacts related to macro-economic factors, including inflation, geopolitical instability and risks of recession, as well as constraints on exam capacity.

However, an overall increase in adjusted comparable store sales and America’s Best reflected ongoing strength in managed care and a notable improvement in comparable store sales from cash-pay customers. EYE announced new actions to accelerate transformation, including new additions to its executive leadership team, continued expansion of exam capacity, new traffic-driving initiatives and initiatives to strengthen the foundation of the business for profitable growth.

Moreover, the company has initiated a review of all stores to optimize the fleet and is evaluating its deployment of capital for new store opening plans in 2025. This bodes well for the stock.

Zacks Rank and Other Key Picks

National Vision currently sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Quest Diagnostics (DGX - Free Report) .

Intuitive Surgicalreported a third-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgicalhas an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.

Abbott, carrying a Zacks Rank #2 (Buy), reported third-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%. 

ABT has an estimated earnings growth rate of 10.1% for 2025 compared        with the S&P 500’s 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.

Quest Diagnostics, carrying a Zacks Rank #2, reported a third-quarter adjusted EPS of $2.35, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion exceeded the Zacks Consensus Estimate by 0.5%.

DGX’s historical five-year earnings growth rate of 7.4% compared favorably with the industry’s 4.2%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 3.31%.

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