National Vision (EYE) Stock on the Rise Since Q2 Earnings Beat

National Vision Holdings Inc. EYE released second-quarter 2020 results on Aug 5, following which the stock has gained 3.8% till yesterday’s close at $35.20.

National Vision delivered adjusted loss per share of 41 cents in the second quarter of 2020 against earnings per share (EPS) of 18 cents in the prior-year quarter. However, the figure was narrower than the Zacks Consensus Estimate of a loss of 57 cents.

The adjustment excludes the impact of certain non-recurring charges like asset impairment, losses on change in fair value of derivatives, amortization of acquisition intangibles, and amortization of debt discount and deferred financing costs, among others.

GAAP loss per share for the quarter was 55 cents a share against EPS of 13 cents in the year-earlier quarter.

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

Revenues in Detail

Revenues in the second quarter totaled $260 million, beating the Zacks Consensus Estimate by 6.9%. However, the top line declined 39.5% from the year-ago number. Moreover, the company noted that 10% of the decline in second-quarter revenues was due to the timing of unearned revenues. The top line also suffered due to temporary store closures.

In the second quarter, National Vision witnessed an uptick in unearned revenues of $34.4 million versus a drop in unearned revenues of $8.5 million in the prior-year quarter. This increase primarily resulted from temporary store closures at the end of the first quarter of 2020 along with stronger sales at the end of the second quarter of 2020.

Comparable store sales declined 44.7% in the reported quarter (adjusted comparable store sales growth was down 36.5%) due to the temporary closing down of stores.

National Vision opened 12 new stores in second-quarter 2020, transitioned five Vision Centers in Walmart stores to its management and closed five stores. The company exited the quarter with 1,185 stores. Overall, store count grew 5.1% year over year.

Margins

Gross profit in the reported quarter was $119.2 million, down 47.5% from the prior-year quarter. Gross margin of 45.9% contracted 699 basis points (bps).

Meanwhile, selling, general and administrative expenses contracted 25.1% to $136.6 million. The company incurred incremental COVID-19 related expenses of $2.5 million in the reported quarter, primarily for the initial acquisition of personal protective equipment supplies.

Adjusted operating loss totaled $17.4 million against prior-year quarter’s operating income of $44.7 million.

Financial Position

National Vision exited the second quarter with cash and cash equivalents of $256.3 million compared with $263.2 million at the end of the first quarter. Long-term debt and finance lease obligations (including current maturities) in the second quarter was $648.2 million, compared with $716.8 million in the year-ago period.

Cumulative net cash flow from operating activities at the end of the second quarter was $71.4 million compared with $119.3 million a year ago.

In the reported quarter, the company authorized 200,000 shares of common stock and issued 81,342 shares as of Jun 27, 2020. Total shares outstanding as of Jun 27, 2020, were 80,415.

2020 Guidance

National Vision, in the wake of uncertainties arising from the pandemic and its duration and impact on the United States, is not providing its 2020 earnings outlook.

However, the company anticipates incurring incremental COVID-19 expenses of approximately $8 million during the year.

The company also anticipates opening 50-55 stores during the year.

Our Take

National Vision exited the second quarter with better-than-expected results despite coronavirus-led economic qualms. The company witnessed comparable growth on increased customer transaction in the last month of the quarter. The company’s contact lens revenue growth was robust due to lesser impact of store closures on contact lens customer transactions. The contact lens category continued to see growth in average ticket resulting from increasing adoption of newer technology lenses at higher prices. This trend is expected to continue. The extension of the partnership with Walmart looks encouraging.

However, the dismal top-line performance of the company due to pandemic-led business disruptions is concerning. The contraction in gross margin does not bode well. Further, the company’s decision to not provide earnings guidance raises apprehensions.

Zacks Rank and Other Key Picks

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

A few other top-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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