Advanced Medical Optics (EYE) - Get National Vision Holdings Inc. Report cut its earnings outlook for 2006 and 2007 due to a "slower-than-expected shift" in its sales mix to premium-priced products that, in turn, has hurt gross margins.
The maker of ophthalmic surgical device said late Monday that it now expects 2006 "adjusted" earnings of $1.90 to $1.95 a share, below its previous guidance of $2.05 to $2.21 a share.
The company cut its 2006 revenue expectations to $1.01 billion to $1.02 billon from $1.02 billion to $1.04 billion.
A Thomson First Call survey of analysts had expected the company to post earnings before items of $2.10 a share on revenue of $1.03 billion.
For 2007, the company expects revenue to be about $1.1 billion, down from prior guidance in the range of of $1.1 billion to $1.12 billion, and adjusted EPS to be approximately $2.60.
First Call had expected earnings of $2.69 a share on revenue of $1.12 billion.
Advanced Medical said the shortfall was brought on specifically by a slower adoption of refractive implants by surgeons outside the U.S., a softer-than-expected domestic laser vision correction procedure volumes, and government reimbursement pressures in Japan and parts of Europe, as well as recent strikes by European surgeons who use the company's cataract products.
"Recent market conditions have made it difficult for us to move as quickly as we had planned to improve our sales mix and deliver the full level of 2006 margin expansion previously projected," said Jim Mazzo, AMO chairman, president and chief executive officer. "While we are disappointed by this near-term change in our outlook, we are experiencing significant progress toward achievement of our key metrics and remain confident in our ability to deliver our 2007 guidance."
The company is now targeting its 2006 adjusted gross margin to be about 66% and 2006 adjusted operating margin to be about 22%. For 2007, the company continues to believe its strategy of improved product mix and productivity is intact, and expects adjusted gross margin and adjusted operating margin to be approximately 69% and 25%, respectively.
AMO expects third-quarter 2006 revenue of about $255 million, with 48% comprising cataract/implant sales, 32% comprising eye care sales and 20% comprising LVC sales. First Call had anticipated third-quarter revenue of $256.7 million.