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

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Zacks Equity Research
·4 min read
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The Cooper Companies, Inc. COO is well poised for growth backed by robust performance by the Cooper Vision (CVI) and Cooper Surgical (CSI) units. The company’s strong performance in the first quarter of 2021 buoys optimism. Cooper Companies became one of the leaders in the soft contact lens market backed by continuous success with its daily silicone hydrogel lenses. However, stiff competition in the contact lens industry and currency fluctuation remain concerning.

Over the past three months, shares of this Zacks Rank #2 (Buy) company have gained 9.3%, compared with the industry’s growth of 3.5%. Meanwhile, the S&P 500 Index has rallied 6.9% in the same time frame.

Cooper Companies is a specialty medical device company operating on a global basis and has a market capitalization of $18.5 billion. The company projects 12% growth for the next year. The company surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 7.81%.

Let’s delve deeper.

Impressive Q1 Results: We are upbeat about Cooper Companies’ recently-released robust first-quarter fiscal 2021 performance. The company witnessed solid performance across its core CVI and CSI units during the quarter under review. Expansion in both gross and operating margins looks encouraging. Moreover, the company continues to witness success with its daily silicone hydrogel lenses that makes it one of the leaders in the soft contact lens market, instilling investor confidence in the stock. Also, the company is optimistic about its myopia management program, which comprises MiSight and Ortho K lenses.

It is also progressing well through inorganic expansion, which most likely is contributing to first-quarter growth as well.

Strong CVI Portfolio Prospects: Cooper Companies maintained its leading position in the market of specialty lenses, supported by highly exclusive Biofinity and Clariti products. The company’s MyDay lenses are already available in Europe and have gained significant traction within a short span of time. Clariti lenses also hold significant growth prospects for the company.

Robust CSI Product Portfolio: Cooper Companies is well positioned to benefit from the expanding CSI product portfolio. In an initiative to bolster its CSI portfolio, CooperSurgical acquired Incisive Surgical, which sells unique absorbable skin staple — INSORB.

However, Cooper Companies operates in a highly competitive contact lens industry. We believe that intensifying competition will continue to increase pricing pressure.

Cooper Companies exposure to foreign currency exchange fluctuation is also a concern. The company generates a significant part of its revenues in foreign currencies. Thus, fluctuations in foreign exchange rates may significantly hamper the company’s overseas revenues.

Estimate Trends

Cooper Companies has been witnessing a positive estimate revision trend for the current year. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 2.8% north to $12.86.

The Zacks Consensus Estimate for its second-quarter 2021 revenues is pegged at $681.7 million, suggesting 29.8% growth from the year-ago reported number.

Other Key Picks

A few other similar-ranked stocks from the broader medical space are DENTSPLY SIRONA Inc. XRAY, Invacare Corporation IVC and McKesson Corporation MCK. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA has a projected long-term earnings growth rate of 7%.

Invacare has a projected long-term earnings growth rate of 57%.

McKesson has an estimated long-term earnings growth rate of 7%.

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