National Vision Holdings, Inc.’s EYE growth in the third quarter is backed by the consistent market expansion of the Owned and Host segment. The company’s strategic progress in terms of expanding exam capacity, recruitment and retention efforts and remote exam initiatives is highly encouraging. However, mounting expenses due to slow economic conditions, along with fierce competitive pressure, add to the worry.
In the past year, this Zacks Rank #3 (Hold) company’s shares have lost 39.1% against the industry’s 21.3% growth and the S&P 500 composite’s 32.7% increase.
The leading optical retailer has a market capitalization of $909.6 million. National Vision beat on earnings in each of the trailing four quarters, delivering an average surprise of 93.73%.
Let’s delve deeper.
Key Upsides of EYE
Owned & Host Gaining Market Share: All four sub-segments within Owned and Host are consistently gaining market share, banking on several growth drivers. America's Best is particularly driving revenues banking on the ongoing strength in managed care. In the third quarter of 2024, America’s Best became the exclusive U.S. retail partner of the Florence by Mills eyewear collection and inked a special partnership with Pair Eyewear nationwide.
National Vision is deploying remote medicine technology in tandem with electronic health record technology to drive expanded capacity and improve in-store efficiency and patient experience. Remote exams currently represent about 11% of assessments in remote-enabled states. Additionally, the company expanded its hybrid remote pilot to 16 stores where optometrists remotely perform exams in other stores, based on availability and demand.
Future Strategies Look Promising: National Vision is advancing its transformation efforts with new additions to the leadership team, continued expansion of exam capacity, new traffic-driving initiatives and actions to strengthen its business foundation for profitable growth.
The company recently completed a comprehensive store fleet review to align its real estate investments with higher standards, optimize profitability for the long term and improve the overall health of the core business. The results of this review include a plan to close 39 stores through 2026 that is expected to deliver approximately $4 million in adjusted EBITDA improvement by the end of the year. In the fourth quarter of 2024, four Detroit-based Eyeglass World stores are set to be converted to America's Best.
National Vision is leveraging its omnichannel capabilities by testing and advancing programs that attract consumers across omnichannel offerings. Further, the company plans to allocate marketing expenditures more effectively for Eyeglass World to drive operational improvements.
Key Downsides of EYE
Tough Competition: National Vision operates in a highly competitive optical retail industry. The companies within the industry generally compete based on recognition of the brand name, price, convenience, selection, service and product quality. National Vision competes with national retailers like LensCrafters, Pearle Vision and Visionworks in the broader optical retail industry. Competition exists in physical retail stores as well as e-commerce platforms.
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Mounting Expenses: Over the past few years, global markets and economic conditions have been challenging, particularly in light of rising interest rates and historic inflation throughout 2023 and global conflict, which has created continued economic uncertainty. The company expects this trend to continue into 2024 and beyond. In the third quarter of 2024, SG&A expenditures were 51.8% of the total revenues and rose 2.8% year over year.
Estimate Trend
The Zacks Consensus Estimate for 2024 earnings per share (EPS) has moved north 6.5% to 49 cents in the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $1.84 billion, implying a 13.3% decline from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Globus Medical GMED and Penumbra PEN.
Haemonetics has an earnings yield of 5.02% compared with the industry’s 1.18%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 19.39%. Its shares have risen 3.6% compared with the industry’s 19.9% growth in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Penumbra, carrying a Zacks Rank #2 at present, has an estimated 2024 earnings growth rate of 33.5% compared with the industry’s 15.9%. Shares of Penumbra have risen 3.2% compared with the industry’s 14.5% growth over the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.
Globus Medical, carrying a Zacks Rank #3 at present, has a long-term estimated growth rate of 14.1%. Shares of the company have rallied 81.8% compared with the industry’s 14.5% growth. GMED’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 17.65%.
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