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Here's Why You Should Retain Cooper Companies (COO) Stock

Zacks Equity Research
·4 mins read

The Cooper Companies, Inc. COO is well poised for growth backed by robust Cooper Vision (CVI) and Cooper Surgical (CSI) product portfolios. However, forex remains a concern.

The stock has gained 14.7%, against the industry’s decline of 4.9% in a year’s time. Also, the S&P 500 Index has rallied 11.7% in the same timeframe.

Cooper Companies — with a market capitalization of $18.48 billion — is a specialty medical device company operating on a global basis. It anticipates earnings to improve 11% over the next five years. Moreover, the company has a trailing four-quarter earnings surprise of 3.8%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Factor Hurting the Stock

Cooper Companies generates a significant part of its revenues in foreign currencies. Fluctuations Consequently, fluctuations in foreign exchange rates may significantly mar the company’s overseas revenues. In the fiscal third quarter, negative year-over-year impact of forex on revenue revenues amounted to $3.3 million. Per the fiscal first-quarter earnings call, revenues are expected to be impacted by $11 million in fiscal 2020.

Key Catalysts

Cooper Companies maintained its leading position in the markets of specialty lenses, supported by highly exclusive products of Biofinity and Clariti. The company’s MyDay lenses are already available in Europe and has have gained significant traction within a short span of time. Clariti lenses also holds significant growth prospects for the company. Per the fiscal second-quarter earnings call, the company expects to recoup some of its lost sales in the quarters ahead.

Speaking of MiSight, the fiscal third quarter witnessed 35% growth resulting in revenues worth $1.6 million. The company has experienced a significant increase in interest from optometrists as they look for value added ways to increase patient flow as their practices reopen. Per fiscal-third quarter 2020 earnings call, management anticipates robust growth in the fiscal fourth quarter as the U.S. MiSight launch is currently fully underway.

Although the CVI segment displayed weak performance in the fiscal third quarter, the results were much better than expected since CooperVision bounced back well from the lows experienced from theowing to the COVID-19 pandemic. Per the fiscal third-quarter earnings call, with respect to this segment, all three regions posted improved performance as the company progressed through the quarter with both June and July being down low-single digits.

Moreover, Cooper Companies is well positioned to benefit from the expanding CSI product portfolio. For fiscal 2020, the company expects anticipates mid-single digit growth from the PARAGARD acquisition. Per the fiscal third-quarter earnings call, PARAGARD witnessed a solid rebound as offices gradually reopened. PARAGARD placement activity rose over the course of June and July, and the momentum continued in August. Hence, the company expects a solid fiscal fourth quarter.

Despite the weakness displayed by the CSI business in the fiscal third quarter, the company exceeded expectations in amid a challenging market environment. On an encouraging note, both the fertility and office and surgical business segments posted improving results as the company progressed through the quarter and into August.

Estimates Trend

For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $2.43 billion, indicating a decline of 8.5% from the year-ago period. The same for adjusted earnings per share stands at $9.23, suggesting a fall of 25.3% from the prior-year reported figure.

Stocks to Consider

Some better-ranked stocks from the broader medical space include West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and PerkinElmer, Inc. PKI. While PerkinElmer sports a Zacks Rank of 1 (Strong Buy), both West Pharmaceuticals and Thermo Fisher carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PerkinElmer has a projected long-term earnings growth rate of 17.4%.

Thermo Fisher has an estimated long-term earnings growth rate of 15%.

West Pharmaceutical has a projected long-term earnings growth rate of 17.4%.

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Zacks Investment Research