Staar Surgical is the IBD Stock Of The Day. Although STAA stock isn't actionable, shares have weathered a tricky second quarter that tripped up rivals.
Much of the June-quarter pain for the segment stemmed from China, where Covid lockdowns have halted some in-person medical procedures. But Staar said it experienced growth in the number of implantable vision-correcting lenses it shipped in China, and STAA stock surged. In fact, shipments to China outgrew every other geography but India and Asia-Pacific.
Looking ahead, Staar Chief Executive Caren Mason says eye surgeries are continuing in China.
"In some hospitals and clinics, our surgeon customers continue to perform (eye correction) surgeries seven days per week," she said on the earnings call last month. "Lockdowns in China are also currently below the peak levels we saw during the second quarter."
During the quarter, sales surged 30% to $81.1 million and adjusted profit rocketed 56% to 42 cents per share. Both measures beat STAA stock analysts' expectations, according to FactSet. But the trend is expected to stall in the current quarter. Analysts call for earnings to fall by a penny year over year, though sales are projected to jump more than 28%.
How STAA Stock Weathered China Unease
Analysts aren't concerned about Staar's trajectory.
Needham analyst David Saxon has a buy rating on STAA stock. He notes Staar has more than 1,000 surgeon customers in China. Sales and shipments of implantable eye lenses grew 40% and 45%, respectively, during the quarter.
Already, the company has 20% to 25% of the market in China. Saxon estimates Staar has a similar market position in the U.S. But U.S. customers pay roughly double for lenses, which should lead to greater revenue. He also noted the company's digital and social media efforts should help Staar gain traction in the U.S. Singer Joe Jonas is an ambassador for the brand.
Last month, Staar noted Jonas had the company's Evo lenses implanted by his doctor.
"He is now free from the daily hassles of contact lenses and eyeglasses," the company said in a news release.
By year-end, Staar expects to have 25% of the market in China, the company told Investor's Business Daily via email.
"It's important to understand that lockdowns are confined to specific areas, so we have been able to offer our Evo lenses in those areas not under lockdown," the company said. "Demand for our Evo lenses has continued at robust levels throughout China as people see the advantages of our Evo lenses on their journey to visual freedom."
Shares Could Continue To Pull Back
Following the company's earnings on Aug. 10, STAA stock rocketed almost 28% over two days. Shares have since pulled back. A strong bounce off the 21-day moving average would provide an entry. But shares could also pull back to the 50-day line or form a new base.
Shares fell 1.4% to close at 90.52 Friday on the stock market today.
STAA stock has a Relative Strength Rating of 91. This puts shares in the leading 9% of all stocks in terms of 12-month performance, according to IBD Digital.
Shares also have strong Composite and EPS ratings of 95 and 97, respectively. The CR measures a stock's fundamental and technical strength, while the EPS Rating reflects its profitability.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
