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The Cooper Companies Upped to Buy

Zacks Equity Research

On Jul 5, Zacks Investment Research upgraded The Cooper Companies Inc. (COO) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

The Cooper Companies reported impressive fiscal 2014-second-quarter (ended Apr 30, 2014) results and a promising fiscal 2014 guidance on Jun 5. Following the earnings release, shares of the company have been on an upward trend and have climbed 10.9% over the last one month.  

The Cooper Companies has been enjoying rising estimate revisions in the past 30 days with nine upward estimate revisions and no downward revision for 2014. The upward estimate revisions led to a 0.6% rise in the Zacks Consensus Estimate to $6.90 per share for the year. Moreover, the company delivered positive earnings surprises in the three of the last four quarters, with a positive surprise of 1.9% in the last reported quarter.

Adjusted earnings per share scaled up 9.3% to $1.64 while revenues increased 7.4% to $412.3 million for the fiscal 2014-second-quarter. Revenues were in line with the Zacks Consensus Estimate.

The CooperVision (CVI) segment continues to gain traction across all geographies driven by the company’s silicone hydrogel products, especially Biofinity and MyDay. Revenues in the CooperSurgical (CSI) segment spiked 8.7% during the quarter, led by growth in its fertility business.

The Cooper Companies also upgraded the lower-end of its earnings outlook for fiscal 2014. Earnings are expected in the band of $6.78 to $7.00 compared with the earlier range of $6.75 to $7.00, while adjusted earnings are projected in the $6.80–$7.00 range as against the prior range of $6.75 to $7.00. The current Zacks Consensus Estimate of $6.90 lies within the guided range.

The Cooper Companies continues to expect total revenue between $ 1,685 and $1,725 million for the year, including CVI and CSI revenues of $1,365–$1,395 million and $320–$330 million, respectively. The current Zacks Consensus Estimate of $1,711 million lies within the guided range.

Recently, The Cooper Companies entered into a definitive agreement to acquire European manufacturer and distributor of soft contact lenses and solutions, Sauflon Pharmaceuticals Ltd, for $1.2 billion. The deal is expected to strengthen the company’s CVI portfolio with multi-tier daily strategy offerings.

The acquisition is anticipated to close before the end of fiscal year and is expected to be accretive to The Cooper Companies’ earnings per share in fiscal 2015.

An encouraging guidance, increased M&A activity and strong market share gains represent a potential upside for The Cooper Companies going forward.

Other Stocks to Consider

Other well-performing stocks worth a look in the medical/dental supply industry include AmerisourceBergen Corporation (ABC), Becton, Dickinson and Company (BDX) and Bio-Reference Laboratories Inc. (BRLI). All these stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on BDX
Read the Full Research Report on ABC
Read the Full Research Report on COO
Read the Full Research Report on BRLI

Zacks Investment Research