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 (Hold) company have gained 1.3% year to date compared with the industry's 8.7% growth. The S&P 500 Index has gained 19.7% in the same time frame.
The Cooper Companies, with a market capitalization of $16.81 billion, is a specialty medical device company operating on a global basis.
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The company’s bottom line is estimated to improve 9% over the next five years. Its earnings beat estimates in two of the trailing four quarters, missed the mark in one and met once, delivering an average surprise of 0.09%.
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 drive strong sales in the upcoming quarters.
In the fiscal third 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 quarter.
The CVI segment displayed solid performance in the same period, with its revenues rising 12% at a constant exchange rate and on an organic basis to $630.2 million. Per management, strong demand for silicone hydrogel lenses contributed to the segmental uptick.
CVI revenues are likely to be in the $2.414-$2.425 billion range (organic growth of 10-11%) in fiscal 2023.
The Cooper Companies is well-positioned to benefit from the expanding CSI product portfolio as well. In the fiscal third quarter, CSI witnessed revenue growth in two focus areas — fertility and office and surgical products.
Revenues from fertility increased 8% year over year to $121.6 million, indicating sustained solid performance. Sales of office and surgical products improved 8% to $178.4 million.
For fiscal 2023, CSI revenues are expected to be in the $1.164-$1.17 billion range, implying organic growth of 7-8%.
Deals to Drive Growth
In 2022, the company formed a joint venture, SightGlass Vision, with another global vision care leader, EssilorLuxottica. This will 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 the cost of sales and selling, general and administrative expenses is concerning. The contraction in operating margin during the first nine months of fiscal 2023 is disappointing.
Estimates Trend
The Zacks Consensus Estimate for the company's fiscal 2023 revenues is pegged at $3.59 billion, implying growth of 8.4% from the 2022 reported figure. The same for adjusted EPS stands at $12.81 for 2023, indicating an improvement of 3.1% from the previous year’s recorded level.
In the past 30 days, COO’s earnings estimates were stable.
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 DaVita Inc. DVA, Biodesix BDSX and Integer Holdings Corporation ITGR.
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 18.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 36.55%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 33.1% year to date compared with the industry’s 2.7% growth.
Biodesix, carrying a Zacks Rank of 2 (Buy) at present, has an estimated growth rate of 32.3% for 2024. BDSX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, delivering an average surprise of 9.76%.
Biodesix’s shares have declined 36.5% so far this year against the industry’s 10.7% decline.
Integer Holdings, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have rallied 31.7% so far this year against the industry’s 4.7% decline.
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DaVita Inc. (DVA) : Free Stock Analysis Report
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Biodesix, Inc. (BDSX) : Free Stock Analysis Report
