It has been about a month since the last earnings report for National Vision (EYE). Shares have lost about 4.1% 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 drivers.

National Vision Q4 Earnings Surpass Estimates, Margins Fall

National Vision Holdings, Inc. delivered an adjusted loss per share of 2 cents for the fourth quarter of 2023, narrower than the year-ago quarter’s adjusted loss of 8 cents. The figure topped the Zacks Consensus Estimate of a loss of 16 cents per share.

GAAP loss in the quarter was 20 cents per share, marking a significant decline from the prior-year reported loss of 12 cents. Full-year 2023 GAAP loss was 84 cents per share against earnings of 53 cents in 2022.

Revenues in Detail

Revenues in the fourth quarter totaled $506.4 million, which surpassed the Zacks Consensus Estimate by 1.4%. The top line rose 8% from the year-ago quarter’s number, led by an increase in adjusted comparable store sales growth and growth from new store sales, partially offset by closed stores. The company registered higher revenues from the America's Best business.

In the fourth quarter, comparable store sales growth was 6% year over year. Adjusted comparable store sales growth was 5.7%. National Vision opened 17 new stores, closed two stores and transitioned four stores to Walmart as part of the partnership termination to reach a store count of 1,413 at the end of the quarter. Overall, the store count rose 4.4% year over year.

Till the end of 2023, National Vision continued to provide its principal products and services through two reportable segments — Owned & Host and Legacy. However, the termination of the longstanding Walmart contract (announced in July) will lead to a full dilution of the company’s Legacy business, effective 2024.

Margins

The gross profit in the fourth quarter was $259.4 million, up 5.1% from the prior-year quarter’s level. Yet, gross margin of 51.2% contracted 139 basis points (bps). SG&A expenses rose 6.1% year over year to $248.3 million. The adjusted operating margin was 2.2%, contracting 53 bps year over year.

Financial Position

National Vision exited 2023 with cash and cash equivalents of $149.9 million compared with $229.4 million at the end of the previous year. The cumulative net cash flow from operating activities at the end of the quarter was $173 million compared with $119.2 million a year ago.

2024 Outlook

National Vision provided its full-year 2024 guidance. For 2024, net revenues are expected to be in the range of $1.965-$2.005 billion. Adjusted comparable store sales are expected at 2-4%.

Adjusted earnings per share is estimated to be in the band of 50-65 cents. The Zacks Consensus Estimate for the same is currently pegged at 54 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -30.21% due to these changes.

VGM Scores

At this time, National Vision has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, National Vision has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

National Vision belongs to the Zacks Medical - Products industry. Another stock from the same industry, Medtronic (MDT), has gained 4.3% over the past month. More than a month has passed since the company reported results for the quarter ended January 2024.

Medtronic reported revenues of $8.09 billion in the last reported quarter, representing a year-over-year change of +4.7%. EPS of $1.30 for the same period compares with $1.30 a year ago.

For the current quarter, Medtronic is expected to post earnings of $1.45 per share, indicating a change of -7.6% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Medtronic. Also, the stock has a VGM Score of D.

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