Reasons to Retain The Cooper Companies (COO) in Your Portfolio
The Cooper Companies, Inc. COO is well poised for growth, backed by strong prospects in both CooperVision (CVI) and CooperSurgical (CSI) business segments. Acquisitions boost the company’s portfolio and buoy optimism. However, unfavorable currency movements and rising costs continue to hurt revenues and margins, respectively.
Shares of this Zacks Rank #3 (Buy) company have risen 14.4% year to date compared with the industry's 13% growth. The S&P 500 Index has gained 13.7% in the same time frame.
The Cooper Companies, with a market capitalization of $18.5 billion, is a specialty medical device company operating on a global basis.
The company’s bottom line is estimated to improve 11% over the next five years. Its earnings beat estimates in two of the trailing four quarters and missed the mark in the other two, delivering an average surprise of 0.01%.
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What's Driving the Company’s Performance?
COO has been leading the specialty lenses market, owing to highly exclusive products of Biofinity and Clariti, and growing products of MyDay and MiSight. Its flagship silicone hydrogel lenses are expected to derive strong sales in the upcoming quarters.
In the fiscal second quarter of 2023, the company witnessed substantial growth across CVI’s Toric, Multifocal and single-use sphere subunits. It also experienced an organic improvement in sales on a geographical basis, with EMEA, the Americas and the Asia-Pacific markets exhibiting strength in the aforementioned quarter.
The CVI segment continued to display solid performance in the same time frame, with its revenues rising 10% at a constant exchange rate and on an organic basis to $589.3 million. Per management, strong demand for silicone hydrogel lenses contributed to the segmental uptick.
CVI revenues are likely to be in the $2.365-$2.4 billion range (organic growth of 8-10%) in fiscal 2023.
The Cooper Companies is well positioned to benefit from the expanding CSI product portfolio as well. In fiscal second-quarter 2023, CSI witnessed revenue growth in two focus areas — fertility, and office and surgical products.
Revenues from fertility increased 1% year over year to $125.1 million, indicating sustained solid performance. Sales of office and surgical products improved 1% to $163 million.
For fiscal 2023, CSI revenues are expected to be in the $1.147-$1.169 billion range, implying organic growth of 5-7%.
Acquisitions to Drive Growth
In 2021, The Cooper Companies acquired privately held Generate Life Sciences, a leading provider of donor eggs and sperms for fertility treatments, fertility cryopreservation services and newborn stem cell storage (cord blood & cord tissue). The deal is expected to have added approximately 30 cents to COO’s adjusted earnings per share (EPS) in the calendar year 2022.
Another acquisition is currently under review. In April 2022, the company entered into an asset purchase agreement to acquire Cook Medical’s Reproductive Health business.
The acquisition will add minimally invasive medical devices to COO’s product portfolio, focused on the fertility, obstetrics and gynecology markets. The deal is likely to be completed by the end of this year.
The completion of the abovementioned acquisition is likely to add approximately 60 cents to COO’s adjusted EPS in the first year.
Both the deals deals helped The Cooper Companies to diversify its businesses to include fertility-related medical devices.
In 2022, the company formed a joint venture, SightGlass Vision, with another global vision care leader, EssilorLuxottica. It did so in order to accelerate the commercialization of novel spectacle lens technologies and expand the myopia management category.
What's Weighing on the Stock?
The Cooper Companies generates a significant portion of its revenues in foreign currencies. Fluctuations in foreign exchange rates may significantly mar its overseas revenues.
Moreover, an increase in selling, general and administrative expenses is concerning. Contraction in both gross and operating margins is disappointing.
Estimates Trend
The Zacks Consensus Estimate for the company's fiscal 2023 revenues is pegged at $3.55 billion, implying growth of 7.3% from the 2022 reported figure. The same for adjusted EPS is pinned at $12.79 for 2023, indicating an improvement of 3% from the previous year’s recorded number.
In the past 30 days, COO witnessed an upward earnings estimate revision of 0.5%.
The Cooper Companies, Inc. Price
The Cooper Companies, Inc. price | The Cooper Companies, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are West Pharmaceutical Services WST, Dentsply Sirona XRAY and CONMED CNMD, 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.
West Pharmaceutical Services has an estimated earnings growth rate of 13.2% for 2024. The company’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 13.61%.
WST’s shares have risen 56.9% year to date compared with the industry’s 13% growth.
Dentsply Sirona has an estimated long-term growth rate of 9.1%. It delivered an average earnings surprise of 10.47% in the last four quarters.
XRAY’s shares have rallied 25.3% year to date compared with the industry’s 13% growth.
CONMED has an estimated long-term growth rate of 19.4%. CNMD’s earnings surpassed estimates in two of the trailing four quarters, missed once and met in the other, delivering an average surprise of 10.54%.
CONMED’s shares have risen 50.2% year to date compared with the industry’s 13% growth.
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