A month has gone by since the last earnings report for National Vision (EYE). Shares have lost about 4.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is National Vision due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
National Vision Q3 Earnings Beat Estimates
National Vision Holdings, Inc. delivered an adjusted earnings per share of 12 cents in the third quarter of 2024 compared with 11 cents in the year-ago period. The figure surpassed the Zacks Consensus Estimate of 5 cents.
The GAAP income from continuing operations was 3 cents per share compared to an earnings of 23 cents per share in the prior-year quarter.
National Vision’s Q3 Revenues
During the nine months ended Sept. 28, 2024, the company’s Walmart store operations, including the former Legacy reportable segment and components of the Corporate/Other category, met the requirements to be classified as discontinued operations. As of Sept. 28, 2024, the company operates under one reportable segment, Owned & Host.
Net revenues from continuing operations in the third quarter totaled $451.5 million, which missed the Zacks Consensus Estimate by 0.03%.
The top line rose 2.9% from the year-ago quarter’s number, driven by growth from new store sales and Adjusted Comparable Store Sales Growth and the effect of unearned revenues.
In the third quarter, comparable store sales growth was 1.4% year over year. Adjusted comparable store sales growth was 0.9%. National Vision opened 18 new stores and ended the period with 1,231 stores. Overall, the store count rose 4.9% year over year.
National Vision’s Q3 Margin Performance
On a consolidated basis, the gross profit in the third quarter rose 2.6% from the prior-year quarter’s level to $261.6 million. The gross margin expanded 110 basis points (bps) despite a 3.3% rise in the cost of revenues (comprising products, services and plans).
SG&A expenses fell 1.6% year over year to $224 million. The adjusted operating margin was 8.3%, which expanded 207 bps year over year.
National Vision’s Financial Position
National Vision exited the third quarter with cash and cash equivalents of $81.2 million compared with $179.5 million at the end of the second quarter.
The cumulative net cash flow from operating activities at the end of the quarter was $103.4 million compared with $153.3 million a year ago.
National Vision’s 2024 Outlook
National Vision reaffirmed its 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 (unchanged). The Zacks Consensus Estimate for fiscal 2024 revenues currently stands at $1.83 billion.
Adjusted comparable store sales are expected to grow 0.5%-1.5% (unchanged). Adjusted earnings per share is estimated in the band of 45-50 cents (unchanged). The Zacks Consensus Estimate for the same is currently pegged at 46 cents.
An Update on National Vision’s Portfolio Review
In a separate release, the company announced the results of its comprehensive store fleet review. In August 2024, National Vision disclosed that it had identified an initial list of less than 5% of its total fleet that was not meeting its profitability thresholds. It plans to close 39 of those stores by the end of fiscal 2026 and convert four Eyeglass World stores to America’s Best by the end of fiscal 2024.
In fiscal 2025, the company will temporarily moderate new store openings to 30-35 new stores. After that time, it expects to return to its more recent store opening cadence as its initiatives gain traction.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -50% due to these changes.
VGM Scores
Currently, National Vision has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, National Vision has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
National Vision is part of the Zacks Consumer Products - Staples industry. Over the past month, Church & Dwight (CHD), a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended September 2024 more than a month ago.
Church & Dwight reported revenues of $1.51 billion in the last reported quarter, representing a year-over-year change of +3.8%. EPS of $0.79 for the same period compares with $0.74 a year ago.
Church & Dwight is expected to post earnings of $0.77 per share for the current quarter, representing a year-over-year change of +18.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Church & Dwight. Also, the stock has a VGM Score of C.
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