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Cooper Tops, Raises FY12 View

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The Cooper Companies (COO - Free Report) , a company focused on contact lens and women’s health, reported third-quarter fiscal 2012 (ended July 31) adjusted earnings per share of $1.45, beating the Zacks Consensus Estimate of $1.29 and surpassing the year-ago earnings per share of $1.15.

Reported net income for the quarter jumped 51.2% year over year to $66.9 million (or $1.36 a share).


Revenues for the quarter increased 8% (up 9% in constant currency, barring acquisitions) year over year to $378.2 million, surpassing the Zacks Consensus Estimate of $368 million.

Growth was led by higher revenues from CooperSurgical (CSI), contributions from the Origio acquisition and market share gains in the contact lens division.

Segment Analysis

Revenues from the contact lens division, CooperVision (CVI), were up 5% (up 10% in constant currency) year over year at $314.2 million. Sales were higher for all categories of lenses, except non single-use sphere lenses which declined 2% on a year-over-year basis to $123 million. Sales for the mainstay toric lenses increased 7% to $94.7 million, multifocal lens sales surged 26% to $24.8 million while revenues from single-use sphere lenses improved 11% to $71.7 million.

On a geographical basis, revenues from EMEA and Americas were up 6% and 11%, respectively, in constant currency, and increased 16% in the Asia Pacific. On a material based analysis, sales of silicone hydrogel contact lenses were up sharply 35% in constant currency to $117.9 million while Proclear contact lens sales edged up 3% to $79 million.   

The smaller women’s health segment (CSI) performed well with revenues soaring 20% year over year (up 6% barring acquisitions) to $64 million. Revenues for CSI were helped by growth across all operating platforms. Surgical procedures revenues increased 16% year over year to $23.7 million, office sales increased 7% to $30.8 million and revenues from fertility sub-division jumped 149% to $9.5 million.

Margin Trends

Gross margin was 63% in the quarter, higher than the 58% a year ago. The gross margin improved due to increased operational efficiencies for both CVI and CSI divisions. Operating margin came in at 20%, up from 15% in the year-ago quarter.

Financial Health

Cooper exited the third quarter with cash and cash equivalents of $12.7 million, up 61.7% year over year. Long-term debt declined 11.7% year over year, to $454.2 million in the quarter.

The company generated $78.1 million of operating cash flow in the quarter and spent $24.1 million on capital expenditure, with insurance recovery of $1.9 million, yielding free cash flow of $62.9 million.


For fourth-quarter fiscal 2012, Cooper expects revenues in the range of $390 million to $400 million, comprising CVI sales of $315 million to $320 million and CSI sales of $75 million to $80 million.

The company envisages reported as well as adjusted earnings per share in the band of $1.50 and $1.55 for the fourth quarter. Free cash flow is expected in the range of $63 million to $83 million. 

For fiscal 2012, Cooper expects revenues of $1,439 million to $1,449 million compared with the earlier range of $1,400 million to $1,440 million. The estimates for revenues comprise CVI sales of $1,186 million to $1,191 million and CSI sales of $253 million to $258 million.

Guidance for reported earnings per share for fiscal 2012 was increased to a range of $5.10 to $5.15 compared to the prior guidance of $4.88 to $5.13 while the forecast for adjusted earnings increased to a band of $5.19 to $5.24 from the earlier forecast of $4.90 and $5.15. Free cash flow is projected in the range of $210 million to $230 million for fiscal 2012.  

Cooper is a global medical products company specializing in a wide range of contact lenses for the vision correction market with a smaller strategic business unit for women’s health. It reportedly holds the number three position in the $6 billion global contact lens industry.

The company is a leader in the high-margin toric lens market. It offers multiple designs of toric lenses, across a wide range of parameters, unlike some of its competitors, who offer toric lenses in a limited number of designs. The company is benefiting from strong demand for its Biofinity toric lenses.

However, Cooper faces formidable competition in each of its major product lines. Competition comes from well established global contact lens makers such as Johnson & Johnson (JNJ - Free Report) and Novartis (NVS - Free Report) . Depressed levels of consumer spending have heightened the competitive pressures on the company.

We currently have a Neutral recommendation on Cooper. The stock holds a Zacks #2 Rank, which translates into a short-term Buy rating.

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