(ACL) Alcon – Solid Growth Across All Segments – Novartis Wants to Acquire Alcon

March 3rd, 2010

Alcon (ACL) is delivering solid growth across all business segments and pays a dividend yield of 2.3%.

Company Description

Alcon is one of the world’s leading suppliers of eye care products. The company has three operating segments: Pharmaceutical, which develops glaucoma products, ocular anti-infectives, and ocular allergy products, Surgical, which serves cataract market with its Infiniti vision system and AcrySof intraocular lenses, and Consumer Eye Care, which sells contact lens care products, artificial tears, and ocular vitamins.

Growth Story

Alcon’s pharmaceutical and surgical segments continue to deliver steady revenue growth. In the fourth quarter, U.S. sales were up 10% thanks to improving demand for prescriptions and cataract procedures. International organic sales, driven by emerging markets, were up 7%.

In addition, Alcon’s acquisition strategy should help drive long-term growth. The company continues to look for acquisitions that will expand its markets and its drug pipeline.

Alcon is also working to build out its drug pipeline through in-licensing deals and collaborations. The company plans to spend $3 billion in research and development projects over the next five years. Alcon is currently working with NovaBay Pharmaceuticals (NBY) to develop anti-infective agents for the treatment of eye, ear and sinus infections. It also has licensing deals with GlaxoSmithKline (GSK) and AstraZeneca (AZN).

Novartis Wants to Acquire Alcon

Roughly 52% of ACL’s outstanding shares are owned by Nestlé. In 2008, Nestlé agreed to sell about 74 million shares to Novartis (NVS), which recently announced its intentions to acquire Alcon.

However, the planned acquisition is not going so smoothly. Alcon called Novartis’ proposal “grossly inadequate” because it is offering minority shareholders substantially less for their shares than it will pay Nestlé for its majority stake in Alcon.

Zacks Equity Reseach believes that Novartis will increase their offer price to minority shareholders.

Fourth-Quarter Results

Quarterly revenues increased 14.5% to $1.7 billion with solid growth across all operating segments. Pharmaceutical sales increased 12.3% to $679 million; surgical sales increased 7.9% to $828 million; consumer sales grew 5.6% to $208 million; and revenues from emerging markets grew 11.5%.

Alcon reported earnings of $1.61 per share, up 14.2% from the year-ago period and easily beating the Zacks Consensus Estimate of $1.50.

Management also gave positive guidance for 2010. The company expects organic sales growth in the mid-to-high single digits and earnings per share of $7.30 to $7.55. The prior Zacks Consensus Estimate for 2010 was $7.35.

Estimates Are Edging Higher

In the last five quarters, Alcon has beaten the Zacks Consensus Estimate by an average of 10.6%.

Analysts increased their full-year 2010 EPS estimates by $0.12 in the last 30 days and full-year 2011 EPS estimates by $0.02. The current Zacks Consensus Estimate is $7.47 for 2010 and $8.27 for 2011.

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(ACL) Alcon – Solid Growth Across All Segments – Novartis Wants to Acquire Alcon

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(ACL) Alcon – Solid Growth Across All Segments – Novartis Wants to Acquire Alcon

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