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

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 complement its portfolio buoy optimism. However, unfavorable currency movements and rising costs continue to hurt the top line and margins, respectively.

Shares of this Zacks Rank #3 (Hold) company have lost 14.9% compared with the industry's decline of 4.9% in the past year. The S&P 500 Index has declined 16.3% in the same time frame.

Cooper Companies — with a market capitalization of $17.29 billion — is a specialty medical device company operating on a global basis. The company’s earnings are estimated to improve 11% over the next five years. The company missed earnings estimates in three of the trailing four quarters and beat once, the average negative earnings being 2.78%.

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Zacks Investment Research


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What's Driving its Performance?

Cooper Companies has maintained its market-leading position in specialty lenses, backed by highly exclusive products of Biofinity and Clariti, and growing products of MyDay and MiSight. In fact, the company's flagship silicone hydrogel lenses are expected to delive strong sales in the coming quarters.

In the fiscal fourth quarter of 2022, the company witnessed substantial growth across CVI’s Toric, Multifocal and single-use sphere subunits. It also experienced an improvement in sales on a geographical basis organically — with the Americas, EMEA and the Asia-Pacific markets exhibiting strength in fiscal 2022.

The CVI segment continued to display solid performance in the fiscal fourth quarter, with its revenues rising 10% at constant exchange rate (CER) and 11% on an organic basis to $561.8 million. Per management, strength in silicone hydrogel lenses contributed to the segmental uptick. CVI revenues are likely to be in the range of $2.325-$2.365 billion (organic growth of 7-9%) in fiscal 2023.

Cooper Companies is well positioned to benefit from the expanding CSI product portfolio as well. Per the fiscal fourth-quarter 2022 earnings call, CooperSurgical witnessed a solid quarter with revenue growth across two focus areas — fertility, and office and surgical products. With respect to fertility, revenues surged 33% year over year to $108.5 million, reflecting sustained solid performance. Sales of office and surgical products surged 58% to $177.8 million.

CSI revenues are expected to be within $1.13-$1.15 billion in fiscal 2023, implying organic growth of 4-6%.

Acquisitions to Drive Growth

In December 2021, Cooper Companies completed the acquisition of 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 add approximately 30 cents to COO’s adjusted earnings in the calendar year 2022.

Another acquisition is currently under review. In April 2022, it 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 addition of Cook Medical’s Reproductive Health business is likely to be accretive to COO’s adjusted earnings by approximately 60 cents in the first year, following the completion of the acquisition.

Both these deals helped Cooper Companies to diversify its businesses to include fertility-related medical devices.

In March, the company formed a joint venture — SightGlass Vision — with another global vision care leader, EssilorLuxottica, to accelerate the commercialization of novel spectacle lens technologies and expand the myopia management category.

What's Weighing on the Stock?

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 $3.47 billion, suggesting growth of 5% from the year-ago reported number. The adjusted earnings per share for the same period stands at $12.44, suggesting an improvement of 0.2%.

The Cooper Companies, Inc. Price

The Cooper Companies, Inc. Price
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 AMN Healthcare Services, Inc. AMN, Cardinal Health, Inc. CAH and Merit Medical Systems, Inc. MMSI.

AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcarehas lost 3.9% compared with the industry’s 25.1% decline in the past one year.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.7%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 3%.

Cardinal Health has gained 44.1% against the industry’s 4.9% rise in the past one year.

Merit Medical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.

Merit Medicalhas gained 18.7% against the industry’s 4.9% decline in the past year.

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