On Friday, JPMorgan updated its outlook on EssilorLuxottica SA (EL:FP) (OTC: OTC:ESLOY), increasing the price target to €225 from the previous €215 while maintaining an Overweight rating on the stock. This adjustment comes in the wake of the company's third-quarter trading update, which was released after the market closed yesterday.
EssilorLuxottica's Q3 report indicated a growth in group sales of 4.0% excluding foreign exchange impacts, which was slightly below JPMorgan's estimate of 4.9%. The shortfall was attributed to slower performance in the European and Asia-Pacific markets, particularly within the Professional Solutions channel. Despite this, management expressed confidence during the earnings call, highlighting the sun business's return to positive growth in September and projecting an upward trend for the fourth quarter.
Management's optimism extended to the company's innovative efforts, noting strong growth in the Stellest line, with a 40% increase in China and a 70% surge in Europe from a small base. Additionally, they anticipate continued momentum from the Ray-Ban Meta (NASDAQ:META) collaboration and the upcoming launch of Nuance by the end of 2024 or early 2025.
JPMorgan's revised profit forecast for EssilorLuxottica factors in the softer third-quarter performance, which is expected to partially roll into the fourth quarter. However, the first-time consolidation of Supreme and Heidelberg is projected to add approximately €600 million in incremental revenue, or 2% against the FY24 base. With these considerations and a forward-rolled discounted cash flow analysis to December 2026, JPMorgan has set the new price target for EssilorLuxottica shares.
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