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Alcon (ALC) Surgical Arm Grows Amid Global Trade Disruption

Alcon Inc ALC is witnessing a recovery in the Surgical and Vision Care businesses. The company’s focus on research and innovation is also encouraging. However, a challenging international market with subdued demand for ophthalmological products amid the pandemic is a concern. The stock currently carries a Zacks Rank #3 (Hold).

Alcon has outperformed the industry over the past year. The stock has rallied 30.4% compared with the industry’s 15.4%.

The company reported better-than-expected results for third-quarter 2021. Year-over-year growth across all sales categories in Surgical and Vision Care was driven primarily by a rise in demand for new products, solid commercial execution and strong market recovery in the United States. Recovery in the international markets remains mixed. However, Alcon was encouraged to see signs of recovery in select European markets late in the quarter.

Segment wise, in Surgical, the portfolio of advanced technology intraocular lenses has been driving increased penetration rates of ATIOLs and Alcon continues to see strong demand for cataract refractive equipment. In Vision Care, the company’s new contact lenses are gaining market share and the Systane brand family has been posting strong double-digit growth in all regions.

Alcon Price

The margin improvements buoy optimism. Alcon’s guidance continues to assume the global markets to return to 2019 levels by the end of 2021. The U.S. markets are expected to continue to grow above 2019 for the remainder of the year, and the international markets as a whole are expected to reach 2019 levels early next year.

On the flip side, in the third quarter of 2021, in terms of end markets, within Surgical, excluding India, the global market was down mid-single-digits compared to 2019. The international markets were down in high single digits, primarily due to emerging markets in Japan, which continue to be suppressed. In Vision Care, international markets have not yet returned to 2019 levels.

While updating its 2021 guidance, Alcon assumed that its international market would return to 2019 levels not before early next year with business in countries such as India and Japan remaining subdued.

Further, in the third quarter, the cost of net sales was up 2.5% year over year. Selling, general & administrative expenses shot up 13.7%. The company currently continues to invest in R&D to deepen its new product pipeline with advanced eye care innovation. Research & development expense increased 47.2% in the reported quarter. This is continuously putting pressure on Alcon’s bottom line.

Key Picks

A few better-ranked stocks from the broader medical space are Chemed Corporation CHE, Laboratory Corporation of America Holdings or LabCorp LH and Medpace Holdings, Inc. MEDP.

Chemed, carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 7.7%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one. Chemed has a trailing four-quarter earnings surprise of 5.6%, on average.

Chemed has outperformed the industry in the past year. CHE has gained 3.7% against a 35.6% decline of the industry.

LabCorp, carrying a Zacks Rank #2, reported third-quarter 2021 adjusted earnings per share (EPS) of $6.82. The bottom line surpassed the Zacks Consensus Estimate by 42.9%. LabCorp’s revenues of $4.06 billion outpaced the Zacks Consensus Estimate by 13.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LabCorp has an estimated long-term growth rate of 10.6%. LH has a trailing four-quarters earnings surprise of 25.7%, on average.

Medpace reported third-quarter 2021 adjusted EPS of $1.29, surpassing the Zacks Consensus Estimate by 20.6%. Medpace’s revenues of $295.57 million beat the Zacks Consensus Estimate by 1.2%.

Medpace has an estimated long-term growth rate of 16.4%. MEDP has a trailing four-quarter earnings surprise of 11.9%, on average. It currently sports a Zacks Rank #1.


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Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report
 
Alcon (ALC): Free Stock Analysis Report
 
Chemed Corporation (CHE): Free Stock Analysis Report
 
Medpace Holdings, Inc. (MEDP): Free Stock Analysis Report
 
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