The Cooper Companies, Inc. COO is well poised for growth on strong segmental performances, increasing penetration in international markets and solid gains from the core CooperVision (CVI) unit. However, foreign exchange-related headwinds remain a concern.
The stock currently carries a Zacks Rank #3 (Hold).
Shares of Cooper Companies have gained 16.7% outperforming the industry’s growth of 0.3% on a year-to-date basis. Meanwhile, the S&P 500 Index rallied 22.2%.
What’s Deterring the Stock?
Cooper Companies generates a significant part of revenues in foreign currencies. Fluctuation in foreign exchange rates is likely to significantly affect its overseas revenues.
The company anticipates foreign exchange headwinds to have an adverse impact of 62 cents per share on earnings and $66 million on revenues on a year-over-year basis in 2019.
What’s Favoring the Stock?
Driven by a highly exclusive product portfolio, featuring the likes of Biofinity and Clariti, Cooper Companies has been able to maintain its leading position in specialty lens markets. Notably, the company’s flagship silicone hydrogel lenses are anticipated to generate strong sales in the near term. We expect its MyDay and Clariti lenses to bolster prospects further.
Moreover, the company’s CooperVision segment has been successful globally and is strengthening the company’s presence through developments such as Eye care professional (ECP) programs in Australia and New Zealand.
This apart, the aforementioned segment remains focused on multiple initiatives that will increase the adoption of its innovative MiSight 1 day product across major global markets.
For fiscal 2019, management expects revenues at CVI to grow 7-8% at pro forma.
Cooper Companies has been witnessing expansion at its CooperSurgical (CSI) business line’s product portfolio, which has been benefiting the segment consistently. Notably, revenues from CSI are anticipated to range between $669 and $679 million.
Acquisitions play an important role in the company’s long-term growth prospects. CSI’s acquisition of Incisive Surgical and CVI’s buyout of Blanchard contact lenses are expected to prove beneficial for the respective segments, which in turn will fuel growth.
An upgraded fiscal 2019 guidance is also favoring the stock. Currently, the company expects revenues to be $2,635-$2,655 million, calling for pro forma growth of 6-7%. Its adjusted earnings per share (EPS) are expected to be $12.27-$12.35.
Which Way Are Estimates Headed?
For fiscal 2019, the Zacks Consensus Estimate for the company’s revenues is pegged at $2.65 billion. The same for earnings stands at $12.32, indicating growth of 7.1% from the prior-year quarter.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Conmed Corporation CNMD, Cardinal Health, Inc. CAH and DENTSPLY SIRONA Inc. XRAY, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conmed Corporation has a long-term earnings growth rate of 17%.
Cardinal Health has a long-term earnings growth rate of 6.2%.
DENTSPLY SIRONA has a long-term earnings growth rate of 11.6%.
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