The Cooper Companies, Inc. COO is well poised for growth, backed by strong prospects in both CooperVision (CVI) and CooperSurgical (CSI) business segments. The company’s acquisitions to boost its portfolio buoy optimism. However, unfavorable currency movements and rising costs continue to hurt revenues and margins, respectively.
Shares of this Zacks Rank #2 (Buy) company have gained 34.4% compared with the industry's 14.4% growth in the past six months. The S&P 500 Index has gained 10.6% in the same time frame.
The Cooper Companies, with a market capitalization of $17.64 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. COO’s earnings missed estimates in three of the trailing four quarters and beat once, the average negative surprise being 1.82%.
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What's Driving The Cooper Companies’ Performance?
The company 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 first quarter of 2023, the company witnessed substantial growth across CVI’s Toric, Multifocal and single-use sphere subunits. It also witnessed 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 both constant exchange rate and on an organic basis to $581.3 million. Per management, strong demand for silicone hydrogel lenses contributed to the segmental uptick. CVI revenues are likely to be in the $2.352-$2.388 billion (organic growth of 8-9%) range in fiscal 2023.
The Cooper Companies is well positioned to benefit from the expanding CSI product portfolio as well. On its fiscal first-quarter 2023 earnings call, CooperSurgical witnessed a solid quarter with revenue growth across two focus areas — fertility, and office and surgical products. Revenues from fertility increased 16% year over year to $112 million, indicating sustained solid performance. Sales of office and surgical products surged 28% to $165.2 million.
For fiscal 2023, CSI revenues are expected to be in the $1.144-$1.166 billion rage, implying an organic increase 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 should 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, 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 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 with the objective 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.
The Zacks Consensus Estimate for the company's fiscal 2023 revenues is pegged at $3.53 billion, implying growth of 6.6% from the year-ago reported figure. The adjusted EPS for the same period stands at $12.73, indicating an improvement of 2.5% from the previous year. In the past 30 days, the company witnessed an upward revision in earnings estimates of 2.1%.
The Cooper Companies, Inc. Price
The Cooper Companies, Inc. price | The Cooper Companies, Inc. Quote
Other Stocks to Consider
Some better-ranked stocks in the broader medical space are Becton, Dickinson and Company BDX, Henry Schein HSIC and Avanos Medical, Inc. AVNS.
Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth of 7.8%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past six months, BDX’s shares have gained 4.4% compared with the industry’s 10.5% growth.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 18.3%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, the average beat being 2.97%.
In the past six months, the company’s shares have gained 17.3% compared with the industry’s 10.5% growth.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has gained 32.4% compared with the industry’s 14.8% increase over the past six months.
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