Alcon Beats On Strong Revenues

Alcon Inc. (ACL: 157.52 -0.58 -0.37%) reported fourth quarter earnings of $1.61 per share, easily beating the Zacks Consensus Estimate of $1.50 and 14.2% above the year-ago earnings of $1.41. Full year earnings came in at $6.81, 10 cents above the Zacks Consensus Estimate and 13.5% above the year ago results.

Net earnings increased mainly due to stronger-than-expected revenues and an improved market environment. Quarterly revenues increased 8.5% (including the impact of foreign exchange) to $1.7 billion. Full year revenues increased 6.3% (including the impact of foreign exchange) to $6.5 billion.

All the revenue segments at Alcon put in a strong performance in the reported quarter. While pharmaceutical sales increased 12.3% to $679 million, surgical sales increased 7.9% to $828 million. Consumer sales grew 5.6% to $208 million. Meanwhile, revenues from emerging markets grew 11.5%.

 

Global glaucoma sales increased 24.4%, benefiting from a 24.4% increase in global sales of the Travatan family of products. Azopt and Azarga also contributed to glaucoma sales growth.

 

Strong performance of intraocular lenses (IOLs), especially Advanced Technology IOLs, helped drive surgical revenues during the quarter. Global sales of advanced technology intraocular lenses rose 42.6% mainly due to market share gains of AcrySof IQ ReSTOR +3.0 lens and broader and more frequent use of AcrySof IQ Toric lens in the U.S.

 

Alcon’s SG&A spend during the quarter increased 16% to $521 million due to an increase in legal reserves and prior year comparison, which included an insurance recovery and a reduction in expense associated with deferred compensation programs. Meanwhile, R&D expenses increased 29.1% to $204 million as Alcon continues to work on strengthening its pipeline. Going forward, both R&D and SG&A spend should increase.

 

Alcon has provided a strong guidance for 2010. The company expects earnings in the range of $7.30 − $7.55 per share on organic sales growth in the mid-to-high single digit range. The current Zacks Consensus Estimate for 2010 is towards the lower end of the guidance at $7.36.

 

We believe Alcon is well positioned to deliver sustainable sales and earnings growth, thanks to its global business presence, a commitment to develop innovative products, and an aging global population. The aging global population and the continued economic development in emerging markets should help drive demand for the company’s products. We currently have a Neutral recommendation on Alcon.