Alcon Inc.’s ALC growth in the third quarter of 2024 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 14.2% compared with the industry and the S&P 500 composite’s 9.5% and 30.5% growth, respectively.
The renowned pharmaceutical and medical device manufacturer has a market capitalization of $42.63 billion. ALC’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 5.94%.
Let us 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. The company’s flagship lenses, Vivity and PanOptix, continue to lead the category in the United States and around the world. Per the latest update, Alcon has been experiencing international uptake for its ATIOLs, with high single-digit to double-digit growth in most regions. Alcon recently acquired BELKIN Vision, whose Direct Selective Laser Trabeculoplasty technology is expected to expand the former’s glaucoma portfolio with a first-line therapy.
During the third quarter, within the Surgical segment, implantable sales were up 5% year over year, driven by advanced technology in intraocular lenses, including Vivity, PanOptix and monofocaltorics in international markets. In consumables, sales were up 6%, driven by vitret consumables in international markets, cataract consumables and price increases. In equipment, Alcon experienced 1% growth and expects sales to be broadly flat until after the planned commercial launch of Unity VCS.
Vision Care Returns to Growth: Within Vision Care, Alcon has been 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 the company’s position as one of the fastest-growing organization. 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. 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.
Alcon’s Key Downsides
Macroeconomic Pressure Stays: Alcon has been experiencing inflationary pressures in electronic components, freight, labor, resins and plastics, impacting its margins. The company is also encountering supply-chain challenges. ALC expects these inflationary pressures and supply-chain challenges to continue into 2024. The cost of net sales in the third quarter was up 4.1% year over year.
Tough Competitive Landscape: The ophthalmology industry is highly competitive. In both Surgical and Vision Care businesses, Alcon faces intense competition. In the Surgical business, Alcon faces a mixture of competitors, ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. Increased product entries from contact lens manufacturers in Asia are posing a massive threat.
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Alcon’s Estimates Trend
The Zacks Consensus Estimate for Alcon’s 2024 earnings per share has moved north 0.3% to $3.03 in the past 30 days.
The Zacks Consensus Estimate for 2024 revenues is pegged at $9.82 billion, indicating a 4.8% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Penumbra PEN and Globus Medical GMED.
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%. HAE’s 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 in 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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