EssilorLuxottica: April 24, 2025 Fundamental Analysis
- Mixed regional performance raises concerns about future growth and profitability.
- EssilorLuxottica reported solid performance across moast geographical areas, wiht the exception of North America.
- Though,North America's performance lagged,with a 4.2% annual increase, falling 227 basis points below consensus.
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EssilorLuxottica‘s north American Performance Dampens Or else Solid Results
Mixed regional performance raises concerns about future growth and profitability.
Key Takeaways
- EssilorLuxottica confirms 2022-2026 guidance despite North American challenges.
- EMEA, Latin America, and Asia-Pacific regions exceed expectations.
- Analysts express concern over dollar depreciation and Ray-Ban Meta profitability.
Regional Performance Highlights
EssilorLuxottica reported solid performance across moast geographical areas, wiht the exception of North America. The EMEA region saw a 9.9% annual growth, exceeding consensus estimates by 307 basis points. Latin America grew by 9.2% (+96BP), and the Asia-Pacific region experienced a 10.4% increase (+59BP).
Though,North America’s performance lagged,with a 4.2% annual increase, falling 227 basis points below consensus. This underperformance offset the positive results from other regions. The robust growth in AMEA (Africa, Middle East, and Asia) was attributed to both Professional Solutions (PS) and Direct-to-Consumer (DTC) channels. Eyeglass sales drove growth in the PS channel, while comparable store sales increased substantially in both categories within the DTC channel.
North American Challenges and Future Outlook
Stagnant revenues in the Professional solutions channel contributed to North America’s underperformance, while the Direct-to-Consumer channel showed positive results with mid- to high-single-digit growth in comparable sales. Management anticipates continued growth in AMEA for 2025 and potential improvement in North America, citing that concerns related to previous tariff uncertainties may have negatively impacted PS orders during the quarter. The company noted growth in both EMEA and North America in April.
EssilorLuxottica reaffirmed its 2022-2026 guidance, projecting average annual revenue growth in the mid-single digits at constant exchange rates and an operating margin between 19% and 20%.
Duties and Supply Chain Concerns
Management expressed less confidence regarding challenges related to duties. While price flexibility was previously the primary strategy, the company is now evaluating alternative approaches, including innovation and acquisitions. Analysts remain somewhat skeptical about the effectiveness of supply chain optimization as a solution.
EssilorLuxottica produces a significant portion of its frames in Italy and China, while some lens production and assembly occur in the United States. The company’s ownership of Eyemed, a major vision insurance operator in the U.S., provides some flexibility in managing prices and mitigating the impact of duties. The company has initiated price increases averaging in the single digits and plans to provide further details in the first half of the year.
Currency depreciation and Profitability risks
Management highlighted the significant risk posed by dollar depreciation, noting that a 10% devaluation could reduce earnings by approximately 6%. However, some analysts estimate the potential impact could be closer to 15%.
While the Ray-Ban Meta product line has positively impacted results in North america and Europe, concerns remain about improving its overall profitability, particularly given potential pressure from duties.
Myopia Management and Nuance Technology
The myopia management segment showed solid performance, with Stellest lenses recording double-digit growth in EMEA and approximately 30% growth in the APAC region. FDA approval in the United States is anticipated by the end of 2025 or early 2026.
The Nuance invisible acoustic appliance has launched in the United States, Italy, and France, with upcoming launches planned for the United Kingdom and Germany. While management has not yet provided specific data due to the product’s early stage,initial customer feedback is positive. Analysts believe this technology holds promise as a potential growth driver, although the current price point (around €1,000) and lack of insurance coverage remain challenges.
Analyst Perspective
Analysts maintain a neutral rating with a target price of €263. EssilorLuxottica is considered an captivating investment chance due to its resilient profile and innovation pipeline.
Key Financial Data Estimates
| 12/23A | 12/24A | 12/25E | 12/26E | 12/27E | |
|---|---|---|---|---|---|
| P/E adj | 27.8x | 32.2x | 39.2x | 36.0x | 33.2x |
| Dividend yield | 2.29% | 1.91% | 1.63% | 1.75% | 1.90% |
| EV/EBITDA(R) | 12.6x | 14.5x | 17.7x | 16.1x | 14.8x |
| EPS adj (€) | 6.21 | 6.43 | 6.57 | 7.15 | 7.75 |
| Growth of APS | 3.23% | 3.53% | 2.12% | 8.82% | 8.36% |
| Dividendo (€) | 3.95 | 3.95 | 4.20 | 4.50 | 4.90 |
| Revenue (€ / m) | 25,394 | 26,507 | 26,382 | 28,236 | 30,221 |
| margin EBIT | 16.5% | 16.7% | 16.2% | 16.4% | 16.5% |
| Net profit (€/m) | 2,294 | 2,356 | 3,040 | 3,309 | 3,585 |
| ROE (after taxes) | 6.06% | 5.99% | 7.41% | 7.81% | 8.17% |
| Lever | 25.3% | 24.8% | 23.5% | 17.1% | 10.6% |