Alcon, Inc. (ALC) delivered core earnings per share of 74 cents in the second quarter of 2024, a 7.2% increase compared to the same period last year (15% increase at a constant exchange rate or CER). This result matched the Zacks Consensus Estimate. Alcon reports ‘core’ results based on non-IFRS (International Financial Reporting Standards) measures. The company’s diluted EPS also rose 32.4% year-over-year to 45 cents.
Alcon’s net sales to third parties in the second quarter amounted to $2.48 billion, falling short of the Zacks Consensus Estimate by 1.4%. However, the top line increased by 3.3% from the previous year’s quarter (up 6% at CER).
Alcon operates through two segments: Surgical (comprising Implantables, Consumables, and Equipment/Other) and Vision Care (comprising Contact Lenses and Ocular Health). In the second quarter, Surgical sales reached $1.42 billion, a 3% increase year-over-year (6% at CER). Implantables sales grew 6%, driven by demand for advanced technology intraocular lenses in international markets. Consumables sales increased 3%, mainly due to cataract and vitreoretinal consumables, particularly in international markets, and price increases. Equipment/Other sales declined by 3% from the prior-year quarter.
The Vision Care segment reported total sales of $1.11 billion, up 7% year-over-year on a reported basis and 10% at CER. Contact Lenses sales increased 9% year-over-year, driven by product innovation, including toric multifocal modalities and price increases. Ocular Health sales rose 5% year-over-year, primarily driven by the portfolio of eye drops, including continued strength from the Systane family of artificial tears.
The cost of net sales in the second quarter was $1.12 billion, up 5.9% year-over-year. Core gross profit rose 0.8% to $1.37 billion, while the core gross margin contracted 123 basis points (bps) to 55.1%. SG&A expenses increased 0.6% year-over-year, while R&D expenses rose 1.4% year-over-year. The core operating margin fell 26 bps in the second quarter to 12.7%.
Alcon exited the second quarter with cash and cash equivalents of $1.37 billion, compared with $1.14 billion at the end of the first quarter. The cumulative net cash flow from operating activities at the end of the second quarter was $871 million, compared with $410 million in the year-ago period. Free cash flow totaled $667 million at the end of the second quarter, compared with $189 million in the comparable 2023 period.
For 2024, Alcon reaffirmed its financial outlook. The company expects 2024 net sales to range between $9.90-$10.10 billion, indicating a 7%-9% growth at CER from 2023. The Zacks Consensus Estimate for ALC’s revenues is $9.94 billion. Core EPS for the full year is projected to be in the range of $3.00-$3.10, suggesting a 15%-18% growth at CER from 2023 levels. The Zacks Consensus Estimate for Alcon’s 2024 earnings is currently $3.05 per share.
Alcon’s second-quarter 2024 performance was a mixed bag, with earnings meeting expectations but revenue falling short. However, the company’s top line improvement year-over-year, driven by strong demand for innovative products, a balanced global footprint, and effective execution, offers a positive outlook. The growth in the Vision Care segment underscores the strength of contact lenses. In June 2024, Alcon’s innovations from the highly anticipated UNITY portfolio, Vitreoretinal Cataract System, and Cataract System secured FDA’s 510(k) clearance. The company is gearing up for product launches in the second half of the year, which are poised to drive its next phase of growth in 2025 and beyond. However, the contraction of both margins during the quarter raises some concerns.
Alcon currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the medical space include Intuitive Surgical, DaVita Inc., and Veracyte.
