Alcon Inc. ALC gains on strong market share gains. The company’s broad pipeline and focus on research and innovation are impressive. Yet, a challenging international market with geopolitical pressure concerns and a tough competitive landscape are threats. The stock presently carries a Zacks Rank #3 (Hold).

Major Factors Driving ALC Shares

Within the Surgical business, of late, the company’s flagship lenses, Vivity and PanOptix, continue to lead the category in the United States and around the world. The Surgical segment saw a 5% year-over-year revenue increase in the fourth quarter of 2024. Growth was fueled by strong international demand for advanced intraocular lenses, consumables, and equipment despite the U.S. market's softness and competitive pressures.

Within Vision Care, Alcon is registering solid growth, banking on strong sales of its contact lenses and ocular health products. In contact lenses, Alcon, with its strategic investments, has secured its position as one of the fastest-growing companies. Alcon’s advanced lenses, including toric and multi-focal modalities, continue to gain market share.

Ocular Health continues to report strong performance with its portfolio of eye drops, including continued strength from the Systane family of artificial tears. In the fourth quarter, SYSTANE Pro Preservative-Free debuted in the United States.

The stock has gained 8.4% year to date compared with the industry’s 4.9% rise. With the company strategically growing through innovation and market expansion, we expect the stock to continue its upward movement in the coming days.

Alcon Price

Alcon price | Alcon Quote

Major Concerns for Alcon

Alcon is experiencing inflationary pressures in electronic components, freight, labor, resins and plastics, impacting the company’s margins. The company is also encountering supply chain challenges in certain components, including microchips, resins and plastics, metals and filters. Going by the industry-wide trend, these inflationary pressures and supply chain challenges are expected to continue into 2025. The cost of net sales in the fourth quarter was up 4.2% year over year. SG&A expenses increased 1% year over year.

The ophthalmology industry is highly competitive, and in both surgical and vision care businesses, Alcon faces intense competition. In the surgical business, Alcon faces a mixture of competitors, ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of specialized products. The company also faces competition from providers of alternative medical therapies, such as pharmaceutical companies, that have the potential to disrupt core elements of its business.

In the vision care business, Alcon operates within a highly competitive environment. In contact lenses, increased product entries from contact lens manufacturers in Asia are posing a massive threat. The market for contact lenses is intensely competitive and characterized by declining sales volumes for older and reusable product lines, and growing demand for daily lenses and advanced materials lenses.

Key Picks

Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Boston Scientific BSX and Cardinal Health CAH.

Phibro Animal Health has an estimated fiscal 2025 earnings growth rate of 62.1% compared with the industry’s 15.4%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 27.06%. Its shares have surged 68.2% compared with the industry’s 12.5% growth in the past year.

PAHC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boston Scientific, carrying a Zacks Rank #2 (Buy), has an earnings yield of 2.7% compared with the industry’s 1.4%. Shares of the company have rallied 56.9% compared with the industry’s 12.5% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.3%.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 10.7% compared with the industry’s 9.4%. Shares of the company have rallied 15.9% against the industry’s 4.1% decline. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 9.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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