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Is Cooper Companies (COO) Poised for Q2 Earnings Beat?

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We expect The Cooper Companies Inc. (COO - Free Report) to beat expectations when it reports second-quarter fiscal 2016 results on Jun 2.

Why a Likely Positive Surprise?

Our proven model shows that CooperCompanies is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Cooper Companies’ Earnings ESP stands at +1.04%. This is because the company’s Most Accurate estimate is $1.94 while the Zacks Consensus Estimate is pegged at $1.92. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise. 

Zacks Rank: Cooper Companies currently has a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Cooper Companies’ Zacks Rank #2 and +1.04% ESP makes us reasonably confident of an earnings beat.

What is Driving the Better-than-Expected Earnings?

We note that Cooper Companies has posted a positive earnings surprise of 2.34% on an average over the last four quarters.

COOPER COS Price, Consensus and EPS Surprise

COOPER COS Price, Consensus and EPS Surprise | COOPER COS Quote

We believe strength at the CooperSurgical segment, driven by the expanding presence in the fertility segment, will drive top-line growth. The company’s focus on genetic testing will also continue to drive growth in our view.

Cooper Companies expects complementary IVF products that were acquired through the takeover of Research Instruments and a small fertility micro-needle company at the beginning of February will add almost $1 million to revenues every quarter, starting from the second quarter.

Further, despite strong promotional activity from Johnson & Johnson (JNJ - Free Report) for their new daily silicone hydrogel product, management expects normal growth from the Americas in the to-be-reported quarter. This will boost CooperVision’s top line. Results from the EMEA and Asia-Pacific regions are also expected to be strong.

Cooper Companies also expects gross margins to make a rebound in the second quarter, which contracted 80 basis points in the first quarter of fiscal 2016.

However, volatile foreign exchange is likely to hurt the company’s results in the quarter to-be-reported.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Baxter International (BAX - Free Report) , earnings ESP of +2.56% and a Zacks Rank #1.

Pfizer (PFE - Free Report) , earnings ESP of +3.17% and a Zacks Rank #1.

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