On Tuesday, Citi maintained its Neutral rating on National Vision Holdings (NASDAQ:EYE) with a steady price target of $11.00. The firm's analysis suggests that while sales may outperform consensus estimates, margin expectations are more cautious.
For the third quarter of 2024, Citi projects that National Vision will post earnings per share (EPS) of $0.07, aligning with consensus estimates, and expects comparable store sales to increase by 1.6%, which is slightly higher than the consensus of a 0.9% rise.
The analyst from Citi highlighted a conservative stance on the company's margins for the quarter, anticipating a 6.8% year-over-year decrease in selling, general, and administrative expenses (SG&A), compared to the consensus estimate of an 8.5% decline. This cautious view on margins is set against a backdrop of sales expectations that are modestly more optimistic than consensus.
Looking ahead to the fiscal year 2025, which marks the first full year after National Vision's transition away from Walmart (NYSE:WMT), Citi believes consensus earnings expectations might be overly optimistic. The consensus estimates a 2025 EPS of $0.53, but Citi's estimate is lower at $0.42.
The analyst pointed out that historically, National Vision has required mid-single-digit comparable store sales growth to leverage their operating and doctor costs.
Management at National Vision is not expected to provide specific guidance for 2025 during the third-quarter earnings call. However, they may offer additional commentary on their business outlook, as they did in the second quarter. Such commentary could lead to a reassessment of the consensus EPS estimates for fiscal year 2025, potentially impacting stock performance following an otherwise in-line quarter.
In other recent news, National Vision Holdings reported a year-over-year revenue increase of 4.6% to $452 million in the second quarter of 2024, with adjusted operating income rising by 13.8% to $14.1 million. The company also revealed an adjusted diluted earnings per share of $0.15.
These recent developments reflect improved performance at America's Best and an overall positive trend in comparable store sales, which grew by 2.4%.
Analysts from BMO Capital Markets maintained a Market Perform rating on National Vision Holdings, with a steady price target of $13.00. This decision followed recent meetings with the company's top executives, where strategic management of business variables was discussed.
Meanwhile, Loop Capital adjusted its outlook on shares of National Vision, reducing the price target to $18.00 from the previous $25.00, while still recommending the stock as a Buy.
National Vision is currently undergoing a strategic review of its store fleet and welcoming new leadership to enhance profitability. The company is also focusing on expansion through remote exams and late-day appointments, investing in marketing and exploring AI technologies for future growth.
Despite some challenges, including less than expected performance and macroeconomic concerns, the company maintains a cautious yet optimistic stance for the future. Investments in AI startup Toku Inc. indicate a commitment to technological advancement, and the company's strong balance sheet provides flexibility for future financial maneuvers.
InvestingPro Insights
To complement Citi's analysis, recent data from InvestingPro provides additional context on National Vision Holdings' (NASDAQ:EYE) financial position and market performance. The company's market capitalization stands at $783.21 million, reflecting its current valuation in the market.
InvestingPro Tips highlight that National Vision is trading near its 52-week low, with the stock price having fallen significantly over the last three and six months. This aligns with the cautious outlook presented in the article and is further evidenced by the year-to-date price total return of -52.41%.
Despite these challenges, InvestingPro data shows that National Vision's revenue for the last twelve months as of Q2 2024 was $2,164.4 million, with a revenue growth of 16.07% over the same period. This growth trend supports Citi's expectation of sales potentially outperforming consensus estimates.
However, the company's profitability remains a concern, as indicated by the negative P/E ratio of -9.6 and the InvestingPro Tip noting that National Vision has not been profitable over the last twelve months. This underscores Citi's conservative stance on margins and the potential overoptimism in consensus earnings expectations for fiscal year 2025.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for National Vision Holdings, providing a deeper understanding of the company's financial health and market position.
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