Investing.com -- EssilorLuxottica (EPA:ESLX) shares jumped over 5% on Thursday after the eyewear giant posted strong fourth-quarter results late Wednesday, with revenue growth surpassing analyst expectations and signaling an inflection point for the company’s long-term growth strategy.
According to analysts at Morgan Stanley (NYSE:MS), EssilorLuxottica reported a 9.2% year-over-year increase in Q4 revenue on a constant currency basis, outpacing the bank’s own estimate of 7% and the consensus of 6.5%.
Organic growth came in at 5.6%, exceeding Morgan Stanley’s projection of 5% and accelerating from the 4% growth recorded in the third quarter.
The company also benefited from merger and acquisition activity, contributing an additional 360 basis points to top-line growth, significantly above expectations of 200 basis points.
North America was the primary driver of the stronger performance, with revenue up 7.8% in Q4 versus just 1.6% in Q3.
The company noted that the sun business rebounded strongly in the region, led by Sunglass Hut’s return to growth and the success of Ray-Ban Meta (NASDAQ:META) smart glasses, which became one of the best-selling models during the holiday season.
Europe, the Middle East, and Africa also posted solid results, growing 9.6% year-over-year, while the Asia-Pacific region saw an impressive 14% increase. Sales in Latin America, however, slightly decelerated from the previous quarter.
While EssilorLuxottica’s full-year 2024 earnings before interest and taxes (EBIT) came in slightly below consensus—missing by less than 1%—the company’s management expressed confidence in its growth trajectory.
The EBIT margin for 2024 expanded by 20 basis points year-over-year to 16.7% (or 50 basis points in constant currency), though it fell just short of the 16.8% expected by analysts.
Inflationary pressures weighed on profitability, but they were offset by price adjustments, operating efficiencies, and synergies from the GrandVision acquisition.
Morgan Stanley noted that 2024 was a turning point for EssilorLuxottica as investors shifted their focus from near-term performance to the company’s broader innovation-driven growth strategy.
The company outlined several major initiatives that could add "billions" in revenue in the coming years, including Ray-Ban Meta, Nuance Audio hearing aid glasses, myopia management solutions, and advancements in diagnostics and surgery.
Ray-Ban Meta has been a particular highlight, with management revealing that over 2 million units have been sold since the second-generation launch in late 2023, ahead of the reported 1 million figure in recent media reports. The company is now scaling up production capacity, aiming to manufacture 10 million units annually by the end of 2026.
Analysts see this product line becoming a significant revenue driver, moving from a low single-digit percentage of sales in 2024 to a mid-to-high single-digit share by 2026.
Meanwhile, Nuance Audio, the company’s new line of over-the-counter hearing aid glasses, recently received regulatory approval in the U.S. and Europe.
The product is set to launch in the U.S. in the first quarter of 2025, followed by key European markets later in the year.
Management emphasized that this product category does not pose a risk of cannibalizing existing sales and is expected to expand EssilorLuxottica’s addressable market.
Myopia management solutions also continue to gain traction, particularly in China, where EssilorLuxottica’s Stellest lenses saw over 50% growth year-over-year in Q4.
The company plans to launch these solutions in the U.S. by late 2025 or early 2026, pending FDA clearance.
Despite not yet revising its official 2026 targets, which include mid-single-digit revenue growth and EBIT margins of 19-20%, EssilorLuxottica signaled that it is well on track to meet these goals.
Morgan Stanley analysts believe management is waiting for greater visibility on the impact of its new initiatives before updating guidance, but the tone of the company’s earnings call suggested that expectations for long-term growth are rising.
(Sam Boughedda contributed to this article).