Shares of The Cooper Companies Inc. (COO - Analyst Report), a company operating in the contact lens and women’s health markets, hit a new 52-week high of $124.08 before closing at $122.80 on Jun 17, 2013. This contact lens major’s shares have increased 8.5% since it reported favorable earnings results on Jun 6.
Drivers that Triggered Momentum
A positive fiscal second quarter 2013 earnings surprise along with a favorable outlook for the contact lens industry facilitated the shares of Cooper to gather momentum and achieve a new high.
Cooper reported second-quarter fiscal 2013 (ended Apr 30) adjusted earnings per share of $1.50 beating the Zacks Consensus Estimate of $1.37 and the year-ago earnings of $1.12 per share. Cooper’s revenues in the fiscal second quarter increased 11% (up 15% in constant currency) year over year to $384 million, missing the Zacks Consensus Estimate of $390 million. Growth was led by robust sales of fertility offerings from CooperSurgical and higher revenues from CooperVision.
The outlook for the contact lens industry is favorable. Trade up to value added lenses, such as silicone hydrogel or one-day lenses, constitutes a major avenue for growth. A trade up to 1-day disposable lenses sharply increases per user sales and profit. The company has grown sales at higher-than-market growth rates.
Key Indicators of the Stock
Cooper currently trades at a forward P/E multiple of 19.8x, reflecting a discount to the peer group average of 20.7x. Its price-to-book (P/B) multiple of 2.5 is at a small discount to the peer group average of 2.65.
At the same time, the company is more efficient with deploying assets and investments than its peers, which acts as a positive factor for growth. It has a 12-month trailing ROA and ROI of 9.5% and 10.8%, which is above the peer group average of 7.4% and 9.9%, respectively.
About the Company
Cooper earns about 80% of its revenues from its contact lens operations with the balance coming from the smaller women’s health segment. Cooper is a leader in the high-margin toric lens market.
Cooper faces formidable competition in each of its major product lines. Competition comes from well established global contact lens makers. Depressed levels of consumer spending have heightened the company’s competitive pressures.
The stock currently carries a Zacks Rank #2 (Buy). We are also positive about Becton, Dickinson and Company (BDX - Analyst Report), CONMED Corporation (CNMD - Analyst Report) and Steris Corp. (STE - Snapshot Report) each of which carries a Zacks Rank #2 (Buy) and are expected to do well.