Yahoo Finance Alcon (ALC) Q1 Earnings Surpass Estimates, 23' EPS View Up
Alcon Inc. ALC delivered core earnings per share (EPS) of 70 cents in the first quarter of 2023, down 2.9% from the year-ago quarter’s figure (up 14% at the constant exchange rate or CER). The figure topped the Zacks Consensus Estimate by 16.7%. Alcon’s “core” results are based on non-IFRS (International Financial Reporting Standards) measures.
In the first quarter, the company’s diluted EPS was 35 cents compared with the reported EPS of 34 cents in the prior-year quarter.
Revenues in Detail
Alcon’s net sales to third parties in the first quarter were $2.33 billion, exceeding the Zacks Consensus Estimate by 4.7%. The top line increased 7.3% from the year-ago quarter’s levels (up 11% at CER).
Quarter in Detail
In the first quarter, total Surgical (consisting of implantables, consumables and equipment/other) sales amounted to $1.30 billion, up 4% year over year and 8% at CER. Net sales in implantables declined 6% at constant currency. Consumables and Equipment/other net sales also increased 9% and 13%, respectively, at CER.
Vision Care (consisting of contact lenses and ocular health) reported total sales of $1.03 million compared with $916 million in the year-ago quarter (up 16% year over year at CER). Net sales of contact lenses increased 10% at CER. Sales were led by continued growth in silicone hydrogel contact lenses, including the Precision1 and Total product families and price increases.
Sales in ocular health increased 15% at CER. This was primarily driven by the portfolio of eye drops, including acquired ophthalmic pharmaceutical products and Systane.
Margins
The cost of net sales in the quarter was $1.03 billion, up 6.5% year over year. The core gross profit rose 8.2% to $1.32 billion in the reported quarter. The core gross margin expanded 38 basis points (bps) to 56.2% in the first quarter of 2023.
Alcon Price, Consensus and EPS Surprise
Alcon price-consensus-eps-surprise-chart | Alcon Quote
The core operating margin was 14.2% in the quarter, contracting 14 bps year over year at CER. The company’s operating margin in the quarter was impacted by an unfavorable product mix from lower PCIOL sales in South Korea, higher R&D investment following the acquisition of Aerie and a negative 1.3 percentage point impact from currency.
Financial Position
Alcon exited the first quarter of 2023, with cash and cash equivalents of $889 million compared with $980 million at the end of fourth-quarter 2022.
The cumulative net cash flow from operating activities at the end of the first quarter was $85 million compared with $66 million a year ago. Free cash flow totaled $19 million at the end of first quarter 2023 against an outflow of $52 million a year ago.
2023 Outlook
Alcon updated its 2023 outlook
The company maintained its net sales projection in the range of $9.2-$9.4 billion, indicating growth of 6-8% at CER from 2022. The Zacks Consensus Estimate for ALC’s revenues is pegged at $9.24 billion.
Alcon raised its projection of core EPS in the range of $2.55-$2.65, suggesting growth of 20-24% at CER over 2022. The Zacks Consensus Estimate for ALC’s earnings is currently pegged at $2.59 per share.
Our Take
Alcon exited the first quarter of 2023 with earnings and revenues beating the estimates. Within the Surgical segment, growth was driven by strong consumables and equipment sales. Consumables net sales increased led by favorable market conditions across geographies and price increases. Within Vision care, the upside was driven by a continued growth in silicone hydrogel contact lenses, including the Precision1 and Total product families, and price increases. Consistent growth in silicone hydrogel contact lenses, including the Precision1 and Total product families and price increases.
However, growth in net sales across all segments continued to be marred by unfavorable currency impacts. Contraction in operating margins also raises apprehension.
Zacks Rank and Key Picks
Alcon currently carries Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted earnings per share (EPS) of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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