Alcon Inc.
ALC
has been gaining from robust performances by its Surgical and Vision Care segments. The company ended fourth-quarter 2021 with better-than-expected results. Robust strength in the company’s PanOptix and Vivity products buoys optimism. Upbeat guidance for 2022 is an added advantage.
However, dull international performance and stiff competition raise apprehension over the company.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 14% against the 0.6% decline of the
industry
. Notably, the S&P 500 composite witnessed a 13.4% rise in the same period.
The renowned global medical device company has a market capitalization of $38.39 billion. Its fourth-quarter 2021 earnings surpassed the Zacks Consensus Estimate by 14.3%.
The company’s long-term earnings growth rate of 14.7% compares to the industry’s growth projection of 15.2%. This figure also compares with the S&P 500’s estimated 11.4% long-term rise.
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Let’s delve deeper.
Key Drivers
Surgical Business Holds Potential:
We are encouraged by Alcon’s Total Surgical business (consisting of implantables, consumables and equipment/other), which reported fourth-quarter sales growth of 14% at CER.
In the quarter, the company remained the market leader in presbyopia-correcting IOLs, driven by robust performances by PanOptix and Vivity. Alcon’s also added Hydrus Microstent to its portfolio of implantable devices. Growth in the U.S. market remained relatively consistent with the previous reported quarter, whereas growth in the international markets saw a solid sequential improvement.
Vision Care Returns to Growth:
Alcon’s Total Vision Care (comprising contact lenses and ocular health) business reported sales growth of 12% at CER in the fourth quarter. The contact lens market rose in the high-single digits in the quarter, led by sales in the United States, and returned to the 2019 reported levels. The company also registered strong performance of PRECISION1 and PRECISION1 for Astigmatism, raising optimism.
Q4 Performance Impressive:
Alcon reported better-than-expected earnings and revenues for the fourth quarter. Year-over-year growth across all sales categories in Surgical and Vision Care was driven primarily by the growing demand for new products, solid commercial execution and strong market recovery in the United States. In terms of end market, within Surgical, barring India, global procedures were up in the low to mid-single digits from 2019. The margin improvements for the quarter buoy optimism. The company’s 2022 guidance, with strong growth projections from 2021, is another upside.
Downsides
International Performance Concerning:
In terms of end market, within Surgical, global cataract procedures were down in the low-single digits in the fourth quarter of 2021, from 2019. Within Vision Care, the growth rates for contact lenses in international markets are still trailing behind the United States due to varying pace of market recovery.
Tough Competition Poses a Threat:
Alcon faces intense competition in the highly competitive ophthalmology industry. Within the surgical business, the company faces a mixture of competitors, ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. In contact lenses, increased product entries from Asia contact lens manufacturers continue to pose challenges.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Alcon’s earnings for 2022 has moved 0.8% north to $2.40.
The Zacks Consensus Estimate for 2022 revenues is pegged at $2.04 billion, suggesting a 6.9% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space are
Henry Schein, Inc.
HSIC
,
McKesson Corporation
MCK
and
IDEXX Laboratories, Inc.
IDXX
.
Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently sports a Zacks Rank #1 (Strong Buy). You can see
t
he complete list of today’s Zacks #1 Rank stocks here.
Henry Schein has outperformed the industry over the past year. HSIC has gained 34.1% compared with the industry’s 8.3% rise over the past year.
McKesson has a long-term earnings growth rate of 11.8%. MCK’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2 (Buy).
McKesson has outperformed the industry over the past year. MCK has gained 56.2% compared with 8.4% industry growth in the said period.
IDEXX has a long-term earnings growth rate of 13%. The company’s earnings surpassed estimates in the trailing four quarters, delivering an average surprise of 18.6%. IDXX currently has a Zacks Rank #2.
IDEXX has outperformed its industry in the past year. IDXX has gained 8.1% against the industry’s 0.6% decline.
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