EssilorLuxottica Earnings: Asia-Pacific Helps Focus on a Strong Start to 2023, but Shares Still Rich

We are maintaining our fair value estimate of EUR 155 for wide-moat EssilorLuxottica EL following a strong first quarter with total revenue up 8.6% over the first quarter of 2022 at constant exchange rates. Both professional solutions and direct to consumer had strong year-over-year growth, with 7.7% and 9.4% at constant exchange rates, respectively. We currently view shares as overvalued.

Across all regions EssilorLuxottica saw strong growth in the high single digits to low double digits, but the standouts were Asia-Pacific and Latin America at 12% and 11.5%, respectively. China’s reopening boosted the Asia-Pacific region, with both businesses and people working to return to their pre-COVID-19 lifestyles. North America and EMEA both saw slightly more muted growth but from much higher bases in the first quarter of 2022, with North America growing 7% to EUR 2.859 billion and EMEA by 8.9% to EUR 2.194 billion. In North America more people are using phone and online appointments to meet their needs, which the company provides in connection to 90 of their LensCrafters stores.

With the strong start to the year, we are maintaining our model forecasts of mid- to high-single-digit growth for EssilorLuxottica in fiscal 2023. An aging global population and increased awareness and access to eyecare through tools like teleoptometry rather than requiring site visits provide a growing tech-savvy target market. As a prominent player in the optical lens market, EssilorLuxottica appears positioned to capitalize upon these individuals, and our model currently forecasts a five-year compound annual growth rate of approximately 6%.