For Immediate Release
Chicago, IL – September 13, 2012 – Zacks Equity Research highlights Liberty Interactive (LINTA) as the Bull of the Day and Sealed Air Corp (SEE) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Cooper Companies (COO), Johnson and Johnson (JNJ) Novartis AG (NVS).
Full analysis of all these stocks is available at http://at.zacks.com/?id=2678.
Here is a synopsis of all five stocks:
We upgrade our recommendation on Liberty Interactive (LINTA) to Outperform following its robust financial results for the second quarter of 2012. Both top- and bottom-line beat the Zacks Consensus Estimates. We believe the TV home shopping business will continue to flourish in the near future as the global macro-economy is expected to gradually stabilize compared with massive fluctuations in the last couple of years.
The company's prestigious QVC division continues to perform exceptionally well. The QVC shopping network has successfully transformed itself into a powerful global brand, which may facilitate Liberty Interactive to boost its revenue into double digits.
The strategic move taken by management to offer QVC programs on mobile platforms, such as smartphones and tablets, was a huge success. Furthermore, Liberty Interactive is continuously generating positive free cash flow to sustain its future endeavors.
Sealed Air Corp's (SEE) second-quarter 2012 total revenue increased 65% year over year to $2 billion while adjusted net earnings plunged 50% to $0.20 per share, due to weaker-than-expected margins. The company lagged the Zacks Consensus Estimate on both lines.
Even though the Diversey acquisition has added to the company's growth profile, the company is exposed to significant leverage owing to the debt incurred to fund the acquisition. Volumes at Diversey have been weaker than expected due to its wide exposure in Europe. Furthermore, given the size of the deal, we are apprehensive of integration risks.
Considering the difficult macro environment, foreign exchange headwinds and lower volumes, the company has reduced its EPS guidance for 2012 to $1.00-$1.10. We thus maintain our Underperform recommendation with a target price of $14.00.
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Cooper Companies: A Strong Buy
Rising earnings estimates on the back of strong third quarter fiscal 2012 results helped Cooper Companies (COO) achieve a Zacks #1 Rank (Strong Buy) on September 11. Moreover, this contact lens and women’s health focused company has delivered positive earnings surprises in six of the last seven quarters with an average beat of 10.9%.
With a strong one-year return of 28.9%, an upgraded fiscal 2012 guidance and a history of beating quarterly earnings estimates, this stock offers an attractive investment opportunity.
The Rank Driver
Several factors such as a strong third quarter, raised guidance, margin expansion, acquisitions expanding the product line and geographical reach as well as share buybacks and an attractive valuation are driving the stock.
Cooper reported its third quarter fiscal 2012 results on September 6, 2012. Adjusted earnings per share (“EPS”) came in at $1.45, reflecting an earnings surprise of 12.4% and a 26.4% year-over-year climb.
The company reported 8% year-over-year revenue growth (up 9% at constant exchange rate or CER and before acquisitions) grossing $378.2 million during the quarter. With this the company surpassed the Zacks Consensus Estimate of $368 million. The upside was primarily on the back of 5% growth in CooperVision revenue to $314.2 million.
The company’s women’s health franchise, CooperSurgical, recorded 20% growth to $64 million, of which $5.6 million came from the acquisition of Origio in July. Denmark-based Origio develops, manufactures and distributes highly specialized products targeting in-vitro fertilization (“IVF”) treatment. Excluding acquisitions, CooperSurgical grew 6% during the quarter.
Improved margins in both the divisions led to a 170 basis point year-over-year expansion in adjusted gross margin to 63.5% during the quarter. In spite of higher selling, general and administrative (up 4.6% to $139.8 million, adjusted) and research and development (up 12.2% to $13.2 million) expenses, adjusted operating margin (excluding expenses associated with the Origio deal) increased 270 basis points to 21.5%.
Cooper is confident of sustaining the improving margin trend. There is further scope for margin upside with the elimination of the silicone hydrogel (a major product material) royalty as patents expire in September 2014 in the US and in March 2016 in the rest of the world. In addition, the company is targeting manufacturing cost reductions, and improving capacity utilization and yields that are likely to drive margin.
Cooper continued with its share repurchase program. The company repurchased 321,000 shares for $25 million during the quarter taking year-to-date repurchases to 984,000 shares for $71.1 million.
Cooper raised its revenue guidance for fiscal 2012 to $1,439−$1,449 million (previous guidance was $1,400−$1,440 million) comprising $1,186−$1,191 million ($1,175−$1,205 million) in revenues from CooperVision and $253−$258 million ($225−$235 million) from CooperSurgical. While the outlook for CooperVision was narrowed, an upped guidance for CooperSurgical takes into account the Orogio acquisition.
Given the strong operating results in the third quarter, the company increased its adjusted EPS guidance for fiscal 2012 to $5.19−$5.24 ($4.90−$5.15). Free cash flow is now projected in the range of $210−$230 million ($200−$230 million) for the fiscal.
Estimates Inch Up
Cooper’s solid performance in the third quarter and the raised fiscal 2012 guidance encouraged 7 upward estimate revisions in as many days. With this, the Zacks Consensus Estimate for fiscal 2012 climbed 3.6% to $5.22 per share. The current estimate implies year-over-year growth of 16.1%.
For fiscal 2013, 8 out of 9 estimates were revised higher over the same time frame, raising the Zacks Consensus Estimate by 3.8% to $5.79 per share, implying year-over-year growth of 10.9%.
Valuation of Cooper looks reasonable compared to its peers by most metrics. Based on 2012 earnings estimates, the company is trading at a price-to-earnings (P/E) of 18.11x, a nominal premium to the peer group average of 18.04x. Moreover, the price-to-book of 2.17x is at a 9.2% discount to the peer group average of 2.39x.
Valuation looks attractive with respect to the return-on-investment (ROI) ratio as well. The ROI ratio of the company stood at 10.7% compared with 9.9% of the peer group average.
About the Company
Headquartered in Pleasanton, California, Cooper is a global medical products company specializing in a wide range of contact lenses and also targets the women’s health market. With a market capitalization of $4.66 billion, the company has a wide portfolio of spherical, toric and multifocal contact lenses using phosphorylcholine technology and silicone hydrogel Aquaform technology. Within the $7 billion soft contact lens industry, Cooper is estimated to have approximately 30% share in the high growth specialty lens categories. Besides, the women’s health segment was strengthened by the acquisition of Origion. However, these businesses are highly competitive with the presence of well-capitalized players such as Johnson and Johnson (JNJ) and CIBA Vision, a unit of Novartis AG (NVS).
Get the full analysis of all these stocks by going to http://at.zacks.com/?id=2649.
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