Balanced Risk-Reward for The Cooper Companies - Analyst Blog

On April 9, we updated our research report on The Cooper Companies COO.  We believe the company is poised for growth given its significant market share in high growth specialty lenses. However, near-term issues emanating from a weak economy make us itchy about the company.

COO reported adjusted earnings of $1.47 per share for the first quarter of its fiscal year ended on Jan 31, 2014, exceeding the year-ago level of $1.23 by 19.5% as well as the Zacks Consensus Estimate by 2 cents per share.

Revenues in the quarter grew 7% to $405.0 million, surpassing the Zacks Consensus Estimate of $400 million. Revenues went up 11% in constant currency excluding the divestiture of Aime.

For fiscal 2014, COO expects total revenues between $ 1,685 and $1,725 million compared with the prior guidance of $1,675 and $1,735 million, including CVI and CSI revenues of $1,365–$1,395 million (previously $1,355–$1,395 million) and $320–$330 million (previously $320–$340 million), respectively. The current Zacks Consensus Estimate of $1,711 million lies within the guided range.

Both reported and adjusted earnings are expected in the range of $6.75 to $7.00 compared with the earlier range of $6.70 to $7.00 for the year. The current Zacks Consensus Estimate of $6.86 lies within the guided range.

We think COO shares will benefit from the favorable outlook for the contact lens industry. A fall in dropout rate of contact lens users and further market penetration, especially in developing nations, is expected with continuous improvisation in the technology. Further, growth in international markets is something that contact lens manufacturers are banking on.

However, COO faces formidable competition in each of its major product lines. Competition comes from globally well established contact lens manufacturers such as Johnson & Johnson JNJ and Novartis AG NVS.

Currently, COO retains a Zacks Rank #2 (Buy). Another medical/dental supplies stock that is currently worth a look is Cardinal Health, Inc. CAH with a Zacks Rank #2 (Buy).