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The Cooper Companies (COO) Beats Earnings Estimates in Q2

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The Cooper Companies Inc. (COO - Free Report) reported adjusted earnings of $2.50 in second-quarter fiscal 2017, surpassing the Zacks Consensus Estimate by 25 cents and improving from $2.05 in the year-ago quarter. We believe that the upside was driven by robust revenue growth.

Revenues increased to $522.4 million from $483.8 million recorded in the prior-year  quarter. This also came above the Zacks Consensus Estimate of $520 million.

Stock Performance

The price performance of the stock has been favorable over the last three months. Cooper Companies rose 12.79%, comparing favorably with the Zacks classified Medical - Dental Supplies sub-industry’s gain of almost 6.28%.
 

Cooper Companies, Inc. (The) Price, Consensus and EPS Surprise

 

Cooper Companies, Inc. (The) Price, Consensus and EPS Surprise | Cooper Companies, Inc. (The) Quote

Revenue Segments

The Cooper Companies has two business segments – CooperVision (CVI) and CooperSurgical (CSI).

CooperVision Segment: CVI revenues increased 4% to $408.5 million on a year-over-year basis.

Coming to the major growth catalysts within the CVI segment, robust performance by Toric (32% of CVI revenues), Multifocal (10% of CVI revenues) and Single-use sphere lenses (26% of CVI revenues) propelled solid growth.

Multifocal revenues rose 4% to $42.9 million, while Toric revenues increased 12% to $131.8 million on a year-over-year basis. Single-use sphere lenses sales climbed 10% to $104.1 million, while sales of non single-use sphere lenses climbed 2% to $129.7 million year over year.

Geographically, CVI revenues increased 4% in the Americas, while revenues from Asia Pacific surged 9% year over year.

CooperSurgical Segment: CSI revenues jumped 23% to $113.9 million on a year-over-year basis.

Coming to the CSI segment, the fertility category witnessed a 5% rise in sales in the reported quarter on a year-over-year basis, totaling $61.2 million. However, the office and surgical products category at the CSI segment rose only 1% to $52.7 million.

Margin Details

Adjusted gross margin in the reported quarter was 66.0% of revenues as compared with 63.2% registered in the year-ago quarter. The gross margin improvement was fueled by favorable product mix within the CooperVision segment, courtesy of the company’s flagship Biofinity product line.

Adjusted operating margin, as a percentage of revenues, was 26.8% in the fiscal second quarter compared with 24.3% recorded in the prior-year quarter. The major reason behind the upside is the acquisition of Wallace, a division of Smiths Group.

Guidance

For fiscal 2017, total revenue is expected in the band of $2,110–$2,135 million.

Revenues at the CVI segment are estimated between $1,645 million and $1,665 million, while CSI revenues are projected in the range of $465–$470 million.

Meanwhile, adjusted earnings are anticipated in the band of $9.50–$9.65 per share compared with the previously provided $9.10–$9.30 range.

Our Take

Cooper Companies continued to gain market traction, courtesy of innovative products like Biofinity and daily silicone hydrogel lenses, while CooperSurgical witnessed stellar growth in its fertility sub-segment.
 
Considering the outstanding performance of the stock, we expect The Cooper Companies to scale higher in the coming quarters. In this regard, positive long-term growth of 11.8% holds promise.

Zacks Rank & Key Picks

CooperVision currently has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector are Luminex Corp. , Inogen, Inc. (INGN - Free Report) and Edwards Lifesciences, Inc. (EW - Free Report) . Luminex and Inogen sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock roughly added 7.0% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of around 82%.

Edwards Lifesciences has an expected long-term adjusted earnings growth of almost 16% (last 3–5 years of actual earnings). The stock added roughly 14.8% over the last three months.

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