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National Vision (EYE) Q2 Earnings Lag Estimates, Margins Down

Zacks Equity Research

National Vision Holdings Inc.’s EYE second-quarter 2019 adjusted earnings per share (EPS) of 20 cents, missed the Zacks Consensus Estimate by a penny. However, the figure was flat year over year. Reported EPS was 13 cents, showing an 18.8% decline from year-ago 16 cents.

Revenues in Detail

Net revenues in the quarter totaled $429.5 million, beating the Zacks Consensus Estimate by 2%. Moreover, revenues rose 11.4% from the year-ago quarter. The upside was primarily led by increased net revenues from AC Lens contact distribution business and to some extent, higher optometrist costs.

Comparable store sales grew 4.4% in the reported quarter (adjusted comparable store sales growth was 3.8%). The upside was led by a 0.3% comparable increase in Military brand. However, there has been a decline in all other brands (America’s Best, Eyeglass World and Fred Meyer) from the year-ago period.

Per management, this was the 70th consecutive quarter of positive comparable store sales growth.

National Vision Holdings, Inc. Price, Consensus and EPS Surprise

 

National Vision Holdings, Inc. Price, Consensus and EPS Surprise

National Vision Holdings, Inc. price-consensus-eps-surprise-chart | National Vision Holdings, Inc. Quote

Business Development

National Vision opened 24 new stores and closed one in second-quarter 2019. The company exited the quarter with 1,128 stores.

Margin Update

Gross margin contracted 123 basis points (bps) year over year to 52.8% in the quarter under review. Selling, general and administrative expenses rose 10.1% year over year to $182.3 million. Adjusted operating margin (without depreciation and amortization, asset impairment and certain other non-recurring expenses) declined 71 bps to 10.4% from the year-ago quarter.

Financial Details

National Vision exited the second quarter of 2019 with cash and cash equivalents of $82.8 million compared with $72.5 million a year-ago (a jump of 14.2%). In the second quarter, net cash provided by operating activities increased 43.7% to $119.3 million from $83 million a year ago.

Guidance Issued

For 2019, the company reaffirmed its net revenue outlook at $1.68-$1.71 billion. The projection includes an estimated $20-25 million of incremental net revenues from the extension of the contact lens distribution business with Walmart, among others. The Zacks Consensus Estimate for the same is pegged at $1.70 billion, at the high end of the guided range. Also, total comparable store sales growth is expected in the band of 3.5-5.5% (adjusted comparable store sales growth within 3-5%).

Our Take

National Vision exited the second quarter on a mixed note. While the company recorded better-than-expected results, a year-over-year decline in adjusted EPS raises concern. The company has been witnessing positive comps on increased customer transaction over the past 70 straight quarters. However, these figures compare unfavorably with the last quarter. National Vision’s plans to continue to focus on core growth drivers in 2019 buoy optimism. In this regard, the company aims at increasing its store count following a formula-based approach. The company is also steadily progressing with its omni-channel efforts to enhance customer experience and operating efficiency.

Zacks Rank & Other Key Picks

National Vision currently carries a Zacks Rank #2 (Buy).

A few other top-ranked companies which came up with solid results this earnings season are Stryker Corporation SYK, NuVasive, Inc. NUVA and LeMaitre Vascular, Inc. LMAT. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered second-quarter 2019 adjusted EPS of $1.98, beating the Zacks Consensus Estimate by 2.6%. Meanwhile, revenues of $3.65 billion surpassed the consensus estimate by 1.3%. The company carries a Zacks Rank #2.

NuVasive delivered second-quarter 2019 adjusted EPS of 63 cents, which surpassed the Zacks Consensus Estimate of 56 cents by 12.5%. Revenues of $292.1 million, topped the consensus estimate of $292 billion by a narrow margin.The company holds a Zacks Rank #2.

LeMaitre Vascular reported second-quarter 2019 adjusted EPS of 23 cents, which beat the Zacks Consensus Estimate by 9.5%. Moreover, revenues of $29.5 million, surpassed the consensus mark of $29 billion by a nominal margin. The company is Zacks #1 Ranked.

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