The Cooper Companies, Inc. (COO Quick QuoteCOO - Free Report) 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 the Zacks Rank #3 (Hold) company have lost 21.4% compared with the industry's decline of 6.4% so far this year. The S&P 500 Index has declined 10.3% in the same time frame.

Cooper Companies — with a market capitalization of $16.64 billion — is a specialty medical device company operating on a global basis. The company’s earnings are estimated to improve 10% over the next five years. The company beat earnings estimates in two of the trailing four quarters and missed twice, the average surprise being 0.22%.

What's Driving Its Performance?

Cooper Companies 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 deliver strong sales in the coming quarters.

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

The segment displayed solid performance in the fiscal second quarter, with its revenues rising 11% at the constant exchange rate (CER) and 6% on a reported basis to $553.8 million. Per management, strength in silicone hydrogel lenses contributed to the segmental uptick. CVI revenues are estimated to be $2.23-$2.25 billion (organic growth of 10-11%) in fiscal 2022.

The Cooper Companies, Inc. Price

The Cooper Companies, Inc. price | The Cooper Companies, Inc. Quote

Cooper Companies is well-positioned to benefit from the expanding CSI product portfolio as well. Per the fiscal second-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 36% year over year to $114.4 million, reflecting sustained solid performance. Sales of office and surgical products surged 43% to $161.6 million.

CSI revenues are expected to be within $1.06-$1.07 billion in fiscal 2022, thereby implying organic growth of 6-7%.

Acquisitions to Drive Growth

In December 2021, Cooper Companies completed the acquisition of privately held Generate Life Sciences — a leading provider of donor egg and sperm for fertility treatments, fertility cryopreservation services and newborn stem cell storage (cord blood & cord tissue). The deal is anticipated to add approximately 30 cents to COO’s adjusted earnings in the calendar year 2022.

The company’s another acquisition is currently under review. In February, it had signed a binding letter of intent 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 to 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 2022 revenues is pegged at $3.29 billion, suggesting growth of 12.7% from the year-ago reported number, while adjusted earnings per share for the same period stands at $13.17, reflecting a decline of 0.5%.

Stocks to Consider

Some better-ranked stocks from the broader medical space are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Patterson Companies, Inc. (PDCO Quick QuotePDCO - Free Report) and McKesson (MCK Quick QuoteMCK - Free Report) .

AMN Healthcare surpassed earnings estimates in each of the trailing four quarters, the average surprise being 15.66%. The company currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

AMN Healthcare's long-term earnings growth rate is estimated at 3.2%. AMN's earnings yield of 10.6% compares favorably with the industry's (2.2%).

Patterson Companies beat earnings estimates in all the trailing four quarters, the average surprise being 16.49%. The company currently carries a Zacks Rank #2.

Patterson Companies' long-term earnings growth rate is estimated at 7.9%. PDCO's earnings yield of 7.6% compares favorably with the industry's 3.9%.

McKesson surpassed earnings estimates in three of the trailing four quarters and missed once, the average surprise being 13%. The company currently carries a Zacks Rank #2.

McKesson’s long-term earnings growth rate is estimated at 9.9%. MCK’s earnings yield of 6.43% compares favorably with the industry's 3.9%.