A month has gone by since the last earnings report for The Cooper Companies, Inc. (COO - Free Report) . Shares have lost about 10.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is COO due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Cooper Companies reported adjusted earnings of $2.79 in first-quarter fiscal 2018, beating the Zacks Consensus Estimate by 10.7% and increasing 44.6% year over year. We believe the upside was driven by robust revenue growth. The stock has a Zacks Rank #3 (Hold).
Revenues increased 4% at constant currency exchange rate (CER) on a year-over-year basis to $590 million. The figure also outpaced the Zacks Consensus Estimate of $582.1 million. The stellar top-line performance was driven by silicone hydrogel lenses, led by the Clariti and MyDay in the dailies space and Biofinity in the monthly space.
The company has two business segments — CooperVision (CVI) and CooperSurgical (CSI).
Revenues at CooperVision Segment increased 8% at constant currency (cc) to $444.8 million on a year-over-year basis. The segment continues to gain from the company’s silicone hydrogel lenses led by solid prospects in the MyDay, Clariti and Biofinity platforms. Coming to the major catalysts within the CVI segment, robust performance by Toric (31% of CVI revenues), Multifocal (11%), single-use sphere lenses (26%) and non single-use sphere lenses (32%) propelled solid growth.
Multifocal revenues rose 5% year over year at cc to $46.9 million, while Toric revenues increased 9% to $137.8 million. Single-use sphere lenses sales climbed 11% at cc to $116.3 million, while sales of non single-use sphere lenses rose 4% to $143.8 million.
Geographically, CVI revenues inched up 3% in the Americas and a respective 15% and 9% in the Asia Pacific and EMEA, at cc.
Revenues at CooperSurgical Segment declined 6% at cc to $145.2 million on a year-over-year basis. However, the company witnessed 32% increase in this segment on a reported basis on the back of the PARAGARD acquisition. The fertility category (39% of CSI revenues) saw a 5% drop in sales at cc to $57 million. Also, the office and surgical products category declined 6% at cc to $88.2 million.
As a percentage of revenues, adjusted gross margin at the CSI segment was 69% in the reported quarter, up 700 basis points (bps) year over year. The margin was negatively impacted by the inventory step-up associated with the PARAGARD buyout.
As a percentage of revenues, adjusted gross margin at the CVI segment was 67% in the reported quarter, higher than 63% of revenues in the year-ago quarter. This reflects an increase of 400 bps on f avorable currency and product mix.
Hence, adjusted gross margin as a whole for Cooper Companies was 68% of revenues, up 500 bps year over year.
Adjusted operating margin, as a percentage of revenues, was 28% of net revenues in the fiscal first quarter, up 500 bps on a year-over-year basis.
For fiscal 2018, total revenues are now expected in the band of $2,510-$2,560 million compared with the previous $2,480-$2,530 million. The Zacks Consensus Estimate for fiscal 2018 revenues is pegged at $2.52 billion, within the guided range.
Revenues at the CVI segment are now estimated in the band of $1,865-$1,900 million, higher than $1,830-$1,865 million. Meanwhile, CSI revenue range has been slashed to $645-$660 million from the prior $650-$665 million.
Adjusted earnings per share are now anticipated in the band of $11.70-$11.90 versus $11.35-$11.65 earlier. The Zacks Consensus Estimate for fiscal 2018 adjusted earnings stands at $11.57, below the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions higher for the current quarter compared to eight lower.
At this time, COO has a poor Growth Score of F, however its Momentum is doing a lot better with an A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, COO has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.