Alcon Inc.’s ALC growth is driven by its robust Surgical business. The performance of the Vision Care arm also appears encouraging. However, concerns remain about the macroeconomic headwinds, which may strain the company’s margin performance. Competitive disadvantages also add to the worry.
In the past year, this Zacks Rank #3 (Hold) stock has advanced 25.5% compared with the industry’s 20.8% growth and the S&P 500 composite’s 31.2% increase.
The renowned pharmaceutical and medical device manufacturer has a market capitalization of $48.21 billion. ALC’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 2.45%.
Let’s delve deeper.
Alcon’s Key Upsides
Surgical Business Grows: Alcon’s Surgical business continues to gain from the company’s diverse portfolio and incremental innovation. ALC’s flagship lenses, Vivity and PanOptix, continue to lead the category in the United States and around the world. Additionally, it continues to expand in areas with significant growth opportunities, such as China.
Of late, the company’s implantable sales are gaining traction, banking on advanced technology intraocular lenses, including Vivity, PanOptix and monofocaltorics in international markets. In Consumables, sales continue to grow, driven by cataract and vitret consumables, particularly in international markets.
Vision Care Returns to Growth: Within Vision Care, Alcon is registering solid growth, banking on strong sales of its contact lenses and ocular health products. In contact lenses, Alcon, with its strategic investments, has secured its position as one of the fastest-growing companies. In daily lenses, the company continues to experience share gains driven by its product innovation, including the PRECISION1 family and the DAILIES TOTAL1 for astigmatism. The PRECISION1 family grew approximately 30% in the second quarter.
Within the reusable lenses, its flagship TOTAL30 continues to gain traction in markets around the world. Ocular Health continues to report strong performance with its portfolio of eye drops, including continued strength from the Systane family of artificial tears.
In the second quarter of 2024, Vision Care net sales, which include contact lenses and ocular health, registered an increase of 10% on a constant currency basis.
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Alcon’s Key Downsides
Macroeconomic Pressure Stays: Alcon is experiencing inflationary pressures in electronic components, freight, labor, resins and plastics. This is adversely impacting its margins. The company is also encountering supply-chain challenges in certain components, including microchips, resins and plastics, metals and filters. The cost of net sales in the second quarter was up 5.9% year over year.
Tough Competitive Landscape: The ophthalmology industry is highly competitive. Alcon faces intense competition in both surgical and vision care businesses. In the surgical business, Alcon faces a mixture of competitors, ranging from large manufacturers with multiple business lines to small ones that offer a limited selection of specialized products. In the vision care business, Alcon operates within a highly competitive environment. In contact lenses, increased product entries from contact lens manufacturers in Asia are posing a massive threat.
Alcon’s Estimate Trend
The Zacks Consensus Estimate for Alcon’s 2024 earnings per share has moved south 0.7% to $3.02 in the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $9.89 billion, suggesting a 5.5% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are TransMedix Group TMDX, AxoGen AXGN and Boston Scientific BSX.
TransMedix Group’s earnings are expected to surge 255.8% in 2024. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 287.5%. Shares of the company have risen 198.3% in the past year compared with the industry’s 20.7% growth. TMDX sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AxoGen, sporting a Zacks Rank #2 (Buy) at present, has an earning yield of 94.1% compared with the industry’s 12.3%. Shares of the company have risen 179.9% compared with the industry’s 20.7% growth over the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 96.46%.
Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 17.1% for 2024 compared with the industry’s 15.7%. In the past year, shares of BSX have risen 56.1% compared with the industry’s 20.8% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.
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