Cooper Companies, Inc. (COO - Free Report) recently signed an asset-purchase agreement to acquire the flagship contraception platform of Israel-based Teva Pharmaceutical Industries (TEVA - Free Report) — PARAGARD Intrauterine Device. This $1.1-billion cash transaction will bolster Cooper Companies’ CooperSurgical (CSI) business in the contraceptive device market. Share price of Cooper Companies inched up 0.2% to close at $253.39 following the news.
However, the acquired business line is exclusively operated in Teva Pharmaceutical’s manufacturing facility in Buffalo, NY.
Cooper Companies expects the acquisition to prove accretive to earnings per share by 70-75 cents within the first year of the deal. Furthermore, excluding acquisition related costs, the transaction is expected to boost Cooper Companies’ gross and operating margin as well.
Per management, the U.S. intrauterine device market is worth $1 billion and is expected to multiply in the mid-single digits, with PARAGARD being the only approved non-hormonal intrauterine device in this space.
Robust CSI Product Portfolio
Cooper Companies is well positioned to benefit from the expanding CSI product portfolio. Management believes that long-term growth at CSI will be driven by the fertility segment where the company has gained a strong foothold, courtesy of the Reprogenetics, Genesis and Recombine buyouts. Moreover, these purchases expand the company's international presence by opening up opportunities in the markets of Spain, the U.K., Japan, Peru, South America, the UAE, South Africa, Jordan and Taiwan.
In the last reported quarter, CSI revenues jumped 4% at constant currency (cc) to $118.7 million on a year-over-year basis. For fiscal 2017, management trimmed its revenue guidance for the CSI segment. CSI revenues are now projected in the range of $459-$462 million, significantly lower than the previous range of $465-$470 million.
Stock Performance Solid
Over the past six months, Cooper Companies has gained 30.3%, comparing favorably with the broader industry’s addition of 7.6%. Moreover, the current level is higher than the S&P 500's gain of 3.9% over the same time frame.
Cooper Companies is poised to gain from an expanding product portfolio and increasing penetration in international markets. Accretive acquisitions like these are also key catalysts for the long haul. Furthermore, the outlook for the contact lens industry is favorable, which is likely to boost the stock price over the long haul. The company’s long-term expected earnings growth rate of 10.8% holds promise in this regard.
Zacks Rank & Other Key Picks
Cooper Companies currently carries a Zacks Rank #2 (Buy).
A couple of other top-ranked stocks in the broader medical sector are Edwards Lifesciences Corp. (EW - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) .
Notably, Edwards Lifesciences sports a Zacks Rank #1 (Strong Buy), while IDEXX Laboratories has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Edwards Lifesciences delivered an average earnings beat of 10.8% over the trailing four quarters. The company has a long-term expected earnings growth rate of 15.2%.
IDEXX Laboratories delivered an average earnings beat of 9.3% over the trailing four quarters. It has a long-term expected earnings growth rate of 19.8%
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