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National Vision's (EYE) Q1 Earnings Beat, Margins Decline

Zacks Equity Research

National Vision Holdings Inc.’s EYE first-quarter 2019 adjusted earnings per share (EPS) of 33 cents were a penny ahead of the Zacks Consensus Estimate. However, the figure dipped 3.6% from the year-ago number.

Revenues in Detail

Net revenues in the quarter totaled $461.2 million, beating the Zacks Consensus Estimate by 1.4%. Moreover, revenues rose 13.1% from the year-ago quarter.

Comparable store sales grew 6.2% in the reported quarter (adjusted comparable store sales growth was 6.7%). This upside was led by an 8.2% comp increase at America's Best brand and a 6.5% comp rise at Eyeglass World brand.

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

Per management, this was the 69th consecutive quarter of positive comparable store sales growth.

Business Development

National Vision opened 26 new stores and closed three in first-quarter 2019. The company exited the quarter with 1,105 stores.

Margin Update

Gross margin contracted 172 bps year over year to 54% in the quarter under review. Selling, general and administrative expenses rose 13.5% year over year to $193.9 million. Adjusted operating margin (without depreciation and amortization, asset impairment and certain other non-recurring expenses) declined 193 bps to 12% from the year-ago quarter.

Financial Details

National Vision exited the first quarter of 2019 with cash and cash equivalents of $72.5 million compared with $17.1 million in 2018. For the first quarter, net cash provided by operating activities was $83 million compared with $77.8 million a year ago.

Guidance Issued

For 2019, the company reaffirmed its net revenue outlook of $1.675-$1.705 billion. Earlier, the company noted that the projection includes an estimated $20-25 million in incremental net revenues from the extended contact lens distribution association with Walmart. The Zacks Consensus Estimate for the same is pegged at $1.70 billion.

Our Take

National Vision exceeded the first quarter on a strong note with better-than-expected earnings and revenues. The company has been witnessing positive comps on increased customer transaction for the past 69 sequential quarters. 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). Some other top-ranked stocks with solid results this earnings season are Stryker Corporation SYK, DENTSPLY SIRONA XRAY and CONMED Corporation CNMD, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Meanwhile, revenues of $3.52 billion were in line with the consensus estimate.

DENTSPLY delivered adjusted EPS of 49 cents in the first quarter of 2019, trumping the Zacks Consensus Estimate of 38 cents. Moreover, revenues of $946.2 million surpassed the Zacks Consensus Estimate of $917.1 million.

CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which exceeded the Zacks Consensus Estimate of 54 cents. Also, revenues of $218.4 million outshined the consensus mark of $213 million.

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