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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 32.3%, compared with the industry’s growth of 20.3% over the past six months. Meanwhile, the S&P 500 Index has rallied 22.6% in the same time frame.
Cooper Companies — with a market capitalization of $17.60 billion — is a specialty medical device company operating on global basis. It anticipates earnings to improve 11% over the next five years. Moreover, the company has a trailing four-quarter earnings surprise of 4%, 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 portion of its revenues in foreign currencies. Consequently, fluctuations in foreign exchange rates may significantly affect the company’s overseas revenues. Per the fiscal first-quarter earnings call, revenues are anticipated to be impacted by $11 million in fiscal 2020.
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 have gained significant traction within a short span of time. Clariti lenses also hold significant growth prospects. Per the fiscal second-quarter earnings call, the company expects to recoup some of its lost sales in the days ahead.
With regard to MiSight, the company witnessed fiscal fourth-quarter revenue growth of $2.5 million, which reflected an improvement of 73%. 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 the fiscal-fourth quarter 2020 earnings call, management maintains its target of $25 million in global MiSight sales (growth of around 250%) despite the impact of the ongoing pandemic on the market.
Although the segment displayed weak performance in the fiscal fourth quarter, the results were much better than expected since CooperVision again bounced back well from the COVID-19 pandemic induced lows. Per the fiscal fourth-quarter earnings call, solid performance in the Americas were driven by strength in MyDay and Bioinfinity and rebound in channel inventory of around $10 million.
Moreover, Cooper Companies is well positioned to benefit from the expanding CSI product portfolio. For fiscal 2020, the company anticipates mid-single digit growth from the PARAGARD acquisition. Per the fiscal fourth-quarter 2020 earnings call, PARAGARD witnessed a solid recovery owing to the reopening of offices and the positive wellness trends that have been witnessed in the United States. As PARAGARD sales continued to exhibit positive trend throughout November, the company anticipates the product to grow on a year-over-year basis in first-quarter fiscal 2021.
Despite the weakness displayed in the fiscal fourth quarter, the company exceeded expectations 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 November.
For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $2.76 billion, reflecting an increase of 13.6% from the year-ago period. The same for adjusted earnings per share stands at $12.51, suggesting growth of 29.8% from the prior-year reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space are Merit Medical Systems, Inc. MMSI, Patterson Companies, Inc. PDCO and McKesson Corporation MCK, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Merit Medical has a projected long-term earnings growth rate of 12.6%.
Patterson Companies has an estimated long-term earnings growth rate of 9.6%.
McKesson has a projected long-term earnings growth rate of 6.6%.
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