Morgan Stanley Keeps Overweight On National Vision After First Earnings Report

National Vision Holdings Inc EYE posted its first earnings report as a public company Thursday. It reported an EPS of 8 cents, a penny better than the consensus.

The Analyst

Morgan Stanley's Simeon Gutman reiterated an Overweight rating on National Vision with a $36 price target.

The Thesis

National Vision reported strong comps of 9.1 percent, which included approximately 160 bps of hurricane-related headwinds, Gutman said in a Thursday note. (See Gutman's track record here.) 

The company's gross margin declined approximately 90 bps, but lower SG&A led to flat EBIT margin and 15-percent EBIT growth, which is Gutman's long-term forecast for the business. The analyst said he expects to see a meaningful upside to comp estimates over the next few years as National Vision takes market share.

The company offers defensiveness given its strong positioning in the non-cyclical eyeglass industry and growth through store expansion, said Gutman. His $36 price target assumes 6-percent comps and 20 bps of annual EBIT margin expansion and implies a 15 times 2019 EBITDA multiple.

The Price Action

National Vision Holdings Inc EYE is trading 0.85 percent higher at $33.18 at the time of publication Friday. The stock has gained about 15 percent since its first trading session Oct. 26. 

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