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Reasons to Add The Cooper Companies (COO) to Your Portfolio

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The Cooper Companies, Inc. (COO - Free Report) is well-poised for growth, backed by strong prospects in its CooperVision (CVI) and CooperSurgical (CSI) business segments. Acquisitions boost the company’s portfolio and buoy optimism. However, unfavorable currency movements and rising costs continue to hurt revenues and margins, respectively.

Shares of this currently Zacks Rank #2 (Buy) company have declined 1.9% year to date against the industry's 2.3% growth. The S&P 500 Index has gained 9.8% in the same time frame.

The Cooper Companies, with a market capitalization of $18.83 billion, is a global specialty medical device company.

The company’s bottom line is estimated to improve 11.3% over the next five years. Its earnings beat estimates in two of the trailing four quarters and met the mark in the other two, delivering an average surprise of 2.48%.

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What's Driving the Company’s Performance?

COO 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 drive strong sales in the upcoming quarters.

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

The CVI segment displayed solid performance in the same period, with its revenues rising 7% at a constant exchange rate to $621.5 million. Per management, strong demand for silicone hydrogel lenses contributed to the segmental uptick.

CVI revenues are likely to be in the $2.573-$2.604 billion range (organic growth of 8-9%) in fiscal 2024.

The Cooper Companies is well-positioned to benefit from the expanding CSI product portfolio as well. In the fiscal first quarter, CSI witnessed revenue growth in two focus areas, which were fertility and office, and surgical products.

Revenues from fertility increased 6% year over year to $119 million, indicating sustained solid performance. Sales of office and surgical products improved 16% to $191.1 million.

For fiscal 2024, CSI revenues are expected to be in the $1.274-$1.293 billion range, implying organic growth of 5-7%.

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 impact its overseas revenues.

Moreover, an increase in the cost of sales and selling, general and administrative expenses is concerning. The contraction in the operating margin during the first quarter is disappointing.

Estimates Trend

The Zacks Consensus Estimate for the company's fiscal 2024 revenues is pegged at $3.84 billion, implying growth of 6.9% from the 2023 reported figure. The same for adjusted earnings per share is pinned at $3.50, indicating an improvement of 9.4% from the previous year’s recorded level.

In the last 30 days, COO’s earnings estimates for fiscal 2024 have remained stable.

Other Stocks to Consider

Some other top-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Medpace (MEDP - Free Report) and Align Technology (ALGN - Free Report) .

DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 13.6%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 29.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DVA shares have risen 30.3% compared with the industry’s 9.5% growth year to date.

Medpace, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 17.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%.

MEDP shares have risen 27% year to date compared with the industry’s 3.5% growth.

Align Technology, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 6.9%. Its earnings surpassed estimates in three of the trailing four quarters and missed the same in one quarter, delivering an average surprise of 5.9%.

ALGN shares have declined 0.5% year to date against the industry’s 2.3% growth.

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