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National Vision (EYE) Q3 Earnings Top Estimates, Margins Up

National Vision Holdings Inc. EYE delivered adjusted earnings per share (EPS) of 54 cents for the third quarter of 2020, a significant rise of 16 cents from the prior-year quarter. The figure exceeded the Zacks Consensus Estimate by 107.7%.

The adjustment excludes the impact of certain non-recurring charges like asset impairment, amortization of acquisition intangibles, and amortization of debt discount and deferred financing costs, among others.

GAAP earnings per share for the quarter were 42 cents a share compared to a penny in the year-earlier quarter.

Revenues in Detail

Revenues in the third quarter totaled $485.4 million, beating the Zacks Consensus Estimate by 1.5%. The top line improved 4% from the year-ago number. The company noted that the impact from the timing of unearned revenues on net revenues and profitability was immaterial.

In the third quarter, comparable store sales growth was 11.6% (adjusted Comparable Store Sales Growth was 12.4%).

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

National Vision opened 18 new stores in third-quarter 2020 and closed one store to reach 1,201 stores at the end of the third quarter. Overall, store count grew 4.9% year over year.

Margins

Gross profit in the reported quarter was $274.5 million, up 20.7% from the prior-year quarter. Gross margin of 56.6% expanded 392 basis points (bps).

Meanwhile, selling, general and administrative expenses increased a marginal 0.1% to $190.5 million. Adjusted operating margin was 17.3%, implying an 872-bps expansion year over year.

Financial Position

National Vision exited the third quarter with cash and cash equivalents of $377 million compared with $256.3 million at the end of the second quarter.

Cumulative net cash flow from operating activities at the end of the third quarter was $203.7 million compared with $170.9 million a year ago.

2020 Outlook

For the fourth quarter of 2020, net revenues are expected in the range of $460-$475 million. Adjusted EPS is projected in the band of 10-14 cents.

The company also provided its 2021 guidance. Net revenues are expected in the range of $1.68 - $1.69 billion. Adjusted EPS is projected in the band of 53-57 cents.

Our Take

National Vision exited the third quarter with better-than-expected results despite coronavirus-led economic effects. The company witnessed comparable growth on increased customer transaction in the quarter. The company recorded positive comps in eyeglasses and contact lens, coming up with strong performance in eyeglasses. Eyeglass pumps were driven by increases in both customer transactions and average ticket, especially at growth premiums.

Zacks Rank and Other Key Picks

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

Some other top-ranked stocks in the broader medical space are West Pharmaceutical Services WST, Thermo Fisher Scientific TMO and Align Technology ALGN.

West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. 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 third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently carries a Zacks Rank #2.

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