Alcon: An Eye to the Future

| About: Alcon Inc. (ACL)
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Excerpt from our One Page Barron's Summary (receive it weekly by email by signing up here):

A Victim of Myopia by Vito J. Racanelli

Highlighted companies: Alcon Inc. (NYSE:ACL), Bausch & Lomb Inc. (BOL), Allergan Inc. (NYSE:AGN), Advanced Medical Optics Inc. (NASDAQ:EYE), Pfizer Inc. (NYSE:PFE), Johnson & Johnson (NYSE:JNJ)
Summary: While Alcon Inc. (ACL) is in the business of helping people see better, Wall Street's vision of its potential is suspiciously myopic: Shares are down 25% over the last year from $150 to $113 on recent earnings drops and the lack of 'new drugs.' But ACL is #1 or #2 in most of its markets, has a diversified portfolio, consistent results, and is well-managed, says Joanne Wuensch of BMO Capital Markets, who rates it "Outperform." It its favor: (1) Baby-boomers are turning 60, and cataracts, the world's leading preventable cause of blindness, occur in 1/2 of all 65-74 year-olds and about 70% of those older. (2) Size: Alcon is "the only fully integrated eye-care company, a one-stop shop," operating in pharmaceutical, surgical, and consumer products -- Tom Bridges of Geneva Investment. (3) Lens-care product recalls this year at Bausch & Lomb Inc. Alcon Chart 11 12 06(BOL) and Advanced Medical Optics Inc. (EYE) spiked sales, and analysts see it holding much of it's gains. (4) A strong R&D program: It spends more than #'s 2, 3, and 4 combined (BOL, EYE and Allergan Inc. (AGN)). (5) Alcon has been showing good gains internationally, growing 18-20% in emerging markets, and 35% in Brazil, Russia and China, plus a major ramp-up in Japan. The downside: (1) Weak sales of its ReSTOR multi-focals, in which high prices have played a role. (2) Will Nestle, its 75% owner, decide to sell, dropping prices? (3) Johnson & Johnson (JNJ) recently indicated it wants to enter the contact-lens solution market, a 'formidable competitor.' On the other hand, it also indicates that JNJ feels the sector has promise. Barron's bottom line: Put Alcon's recent problems into perspective -- within two years, the company's shares, recently around 113, could be changing hands near 140.
Related: Who Gains, Who Loses From the Bausch & Lomb Recall?, JNJ: A Healthy Blue-Chip, Jim Cramer's Take on ACL