Will the recent positive trend continue leading up to its next earnings release, or is Cooper Cos. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Cooper Companies’ Q3 Earnings Miss, CVI Shines Overseas
Cooper reported third-quarter fiscal 2018 earnings of $3.00 per share, missing the Zacks Consensus Estimate by 2.6%. However, earnings increased 13.6% on a year-over-year basis.
The company reported revenues worth $660 million, surpassing the Zacks Consensus Estimate of $653.4 million. On a year-over-year basis, revenues improved 18.7%. Per management, this was an all-time high for Cooper.
Cooper reports revenues through two major segments — CooperVision (CVI) and CooperSurgical (CSI).
This segment garnered revenues worth $489.1 million, up 9% on a pro forma basis and 12% year over year. Per management, Cooper saw a significant uptick in daily silicone hydrogel lenses with pro forma growth of 43%, driven by solid worldwide growth of MyDay and clarity.
Toric (31% of CVI) revenues totaled $153.6 million, up 9% on a pro forma basis and 11% year over year.
Multifocal (11%) generated revenues worth $52.7 million, up 10% at pro forma and 13% year over year.
Single-use sphere (28%) posted revenues worth $137.6 million, which shot up 17% at pro forma and 19% from a year ago.
Non single-use sphere (30%) revenues came in at $145.2 million, up 1% at pro forma and 7% from a year ago.
Geographically, the segment saw an improvement in U.S. revenues (38%), up 8% at pro forma and 9% year over year to $184.4 million. Per management, growth in the United States was driven by clariti and MyDay strength.
EMEA revenues (41%) were $199.2 million, up 6% at pro forma and 11% from the prior-year quarter. Management attributed the upside to Cooper’s Biofinity and Avaira suite of products.
Asia Pacific sales (21%) rose 14% at pro forma and 19% year over year to $105.5 million on a strong show by silicone hydrogel dailies and Biofinity.
This segment posted revenues of $170.9 million up 6% at pro forma and 44% year over year. Per management, growth was led by a strong 9% rise in PARAGARD.
Sub-segment Office and Surgical products (61% of CSI) accounted for $104.4 million, up 8% at pro forma and a whopping 96% on a year-over-year basis. Fertility (39%) posted sales worth $66.5 million, up 2% year over year and 4% at pro forma.
As a percentage of revenues, adjusted gross margin at the CSI segment was 72%, up from 62% of the year-ago period.
As a percentage of revenues, adjusted gross margin at the CVI segment was 66%, up 100 basis points (bps) in the reported quarter.
In the fiscal third quarter, gross profit as a whole for the company totaled $426.8 million, up 19.8% year over year. Adjusted gross margin was 67%, up 200 bps from year-ago quarter. Per management, gross margin was favorably impacted by manufacturing efficiencies, product mix and the addition of PARAGARD within CSI.
Operating income in the quarter totaled $115.6 million, up 2.5% year over year. Adjusted operating margin was 28%, up 200 bps from the prior-year quarter.
Cooper updated its fiscal 2018 guidance.
For fiscal fourth quarter, revenues are expected within $634-$649 million, reflecting 6% to 9% growth at pro forma.
CVI revenues are expected within $468-$477 million, showing pro forma growth of 8% to 10%. The same for CSI is expected in the range of $166-$172 million, reflecting pro forma growth of 3% to 6%.
Adjusted earnings per share for the quarter are projected between $2.90 and $3.00.
For fiscal 2018, revenues are expected between $2,515 million and $2,530 million.
CVI revenues are expected between $1,869 million and $1,878 million, while the same for CSI is within $646-$652 million.
Adjusted earnings per share for fiscal 2018 are expected within $11.55-$11.65.
Fresh estimates followed a downward path over the past two months.
At this time, Cooper Cos. has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Cooper Cos. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.