Why Is National Vision (EYE) Down 37% Since Last Earnings Report?

A month has gone by since the last earnings report for National Vision (EYE). Shares have lost about 37% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is National Vision due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

National Vision’s Q4 Earnings & Revenue Beats Estimates

National Vision announced fourth-quarter and 2019 earnings results, wherein adjusted earnings per share of 11 cents improved stupendously year over year from a penny. The metric also surpassed the Zacks Consensus Estimate of a break-even level. The adjustments include certain non-recurring charges related to the amortization of acquisition intangibles and deferred financing costs, asset impairment, and expenses on stock compensation.

However, on a GAAP basis, the company’s earnings per share of 5 cents reflect an improvement from a loss of 24 cents from the year-ago quarter.

Yearly adjusted earnings per share were 81 cents, reflecting a 22.7% rise from the year-ago period. This time too, the company beat the Zacks Consensus Estimate of 54 cents by 50%.

Revenues in Detail

Net revenues in the quarter totaled $401.8 million, beating the Zacks Consensus Estimate by 3.3%. Moreover, revenues rose 12.9% from the year-ago quarter, resulting from comparable store sales and unit growth.

Also, the top line was positively impacted (1.5%) by the timing of unearned revenues, higher eyeglass margin, a higher mix of reimbursed eye exam sales and lower optometrist costs.

Yearly revenues were $1.72 billion, reflecting a 12.2% increase from the year-ago period. Revenues beat the Zacks Consensus Estimate by 0.6%.

Segmental Details

Comparable store sales grew 10.1% in the reported quarter (adjusted comparable store sales growth was 8.1%). The upside was primarily led by 9% comparable sales growth in America’s Best and 6.4% comparable sales growth in Eyeglass World. Military’s growth was 9.9%, whereas the Legacy segment grew 5.1% in the reported quarter.

Per management, this was the 72nd consecutive quarter of positive comparable store sales growth.

National Vision opened eight stores in fourth-quarter 2019 and exited the quarter with 1,151 stores. However, the company closed two stores in the reported quarter.

Margin Update

Gross profit rose 17.4% to $214.2 million. Gross margin expanded 206 basis points (bps) year over year to 53.3% in the quarter under review. Selling, general and administrative expenses rose 7.2% year over year to $178 million.

Adjusted operating profit totaled $36.2 million, reflecting a 121.7% increase from the prior-year quarter. Adjusted operating margin (without depreciation and amortization, asset impairment, and certain other non-recurring expenses) expanded 442 bps to 9% from the year-ago quarter.

Financial Details

National Vision exited the year with cash and cash equivalents of $39.3 million compared with $17.1 million at the end of 2018 (a jump of 129.6%).

At the end of 2019, cash flow from operating activities was $165.1 million compared with $106.6 million at the end of 2018.

Guidance Issued

For 2020, the company expects net revenues of $1.875-$1.905 billion. The Zacks Consensus Estimate for the same is pegged at $1.89 billion.

Adjusted comparable store sales growth is projected to be 3-5%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.