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Why Is Cooper Cos. (COO) Down 10.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Cooper Cos. (COO - Free Report) . Shares have lost about 10.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cooper Cos. due for a breakout? 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 catalysts.

Cooper Companies Earnings Beat in Q3, EPS View Impressive

Cooper reported third-quarter fiscal 2019 adjusted EPS of $3.23, which surpassed the Zacks Consensus Estimate of $3.16. The bottom line increased 7.7% on a year-over-year basis.

Revenues of the company came in at $679.4 million, missing the Zacks Consensus Estimate of $686.9 million. However, on a year-over-year basis, the top line improved 2.9%.

Q3 Segment Details

CooperVision (CVI)

This segment’s revenues totaled $509.1 million, up 6% on a pro-forma basis and 4% on a reported basis.

Per management, the segment saw a noticeable uptick in the Single-use sphere lenses (29% of CVI), reflecting pro-forma growth of 9%, driven by accelerating growth in both Clariti and MyDay. Single-use sphere lenses revenues totaled $146.3 million.

Toric (32% of CVI) revenues totaled $163.1 million, up 8% on a pro-forma basis.

Multifocal (10% of CVI) generated revenues of $52.4 million, up 2% at pro forma and down 1% year over year.

Non single-use sphere (29% of CVI) revenues came in at $147.3 million, up 9% at pro forma and 6% from the year-ago quarter.

Geographically, the segment witnessed an improvement in revenues in the Americas (38% of CVI), up 5% at pro forma and 6% year over year to $195 million.

EMEA revenues (39% of CVI) totaled $196 million, up 3% at pro forma but down 2% from the prior-year quarter.

Asia Pacific sales (23% of CVI) rose 13% at pro forma and 12% year over year to $118.1 million.

CooperSurgical (CSI)

This segment posted revenues of $170.3 million, up 2% at pro forma and flat year over year.

Sub-segment Office and Surgical products (62% of CSI) accounted for $106.3 million revenues, up 2% on a year-over-year basis.

Fertility (38% of CSI) revenues were $64 million, down 4% year over year but up 5% at pro forma.

Margin Analysis

In the fiscal third quarter, gross profit was $450.7 million, up 5.6% year over year.  Gross margin was 66.3% of net revenues, up 160 basis points (bps) year over year.

On an adjusted basis, gross margin was 67%, flat year over year.

Operating income in the quarter was $142.2 million, up 23% year over year. Adjusted operating margin was 28%, flat when compared to the prior-year quarter.

FY19 View Updated

For fiscal 2019, Cooper Companies expects revenues within $2,635-$2,655 million, calling for pro forma growth of 6-7%.

Notably, CVI revenues are expected within $1,966-$1,976 million, reflecting 7-8% of pro forma growth. CSI revenues are projected between $669 million and $679 million, mirroring 4-6% of pro forma growth.

Adjusted EPS is expected within $12.27-$12.35. The mid-point of $12.31 is higher than that of the previously-stated guidance of $12.15-$12.35.

For fiscal fourth quarter, revenues are projected within $674-$694 million, calling for 5-8% growth at pro forma.

CVI revenues are expected within $503-$513 million, indicating 6-8% growth at pro forma. CSI revenues are expected between $171 million and $181 million, reflecting 1-7% growth at pro forma.

Fourth-quarter EPS is expected within $3.22-$3.30.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.

VGM Scores

At this time, Cooper Cos. has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Cooper Cos. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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