Cooper Cos. (COO) Down 14% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for Cooper Cos. (COO). Shares have lost about 14% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Cooper Companies Misses on Q1 Earnings, Margins Contract

Cooper Companies reported first-quarter fiscal 2020 adjusted EPS of $2.69, which lagged the Zacks Consensus Estimate of $2.71. The bottom line deteriorated 6.6% on a year-over-year basis.

Revenues of the company came in at $646.2 million, beating the Zacks Consensus Estimate by 0.3%. Also, on a year-over-year basis, the top line improved 2.9%.

Q1 Segment Details

CooperVision (CVI)

This segment’s revenues totaled $485.2 million, up 3% at cc and 4% on a reported basis.

Per management, the segment saw a substantial uptick in revenues from Single-use sphere lenses (28% of CVI), reflecting growth of 5% at cc on accelerating growth in both Clariti and MyDay. Single-use sphere lenses revenues totaled $138.1 million.

Toric (32% of CVI) revenues totaled $155.1 million, up 7% at cc.

Multifocal (11% of CVI) generated revenues of $51.8 million, up 6% at cc.

Non single-use sphere (29% of CVI) revenues came in at $140.2 million, down 1% at cc and 2% from the year-ago quarter.

Geographically, the segment witnessed an improvement in revenues in the Americas (39% of CVI), up 8% at cc and 8% year over year to $189.4 million.

EMEA revenues (39% of CVI) totaled $187 million, up 3% at cc and 1% from the prior-year quarter.

Asia Pacific sales (22% of CVI) declined 1% at cc and 1% year over year to $108.8 million.

CooperSurgical (CSI)

This segment posted revenues of $161 million, up 2% at cc and also year over year.

Sub-segment Office and Surgical products (61% of CSI) accounted for $98.5 million revenues, up 3% at cc and on a year-over-year basis.

Fertility (39% of CSI) revenues were $62.5 million, flat year over year and up 1% at cc.

Margin Analysis

In the fiscal first quarter, gross profit was $426.5 million, up 1.9% year over year.  Gross margin was 66% of net revenues, down 60 bps year over year.

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

Operating income in the quarter totaled $111.1 million, up 0.2% year over year. Adjusted operating margin was 25%, down 100 bps from the prior-year quarter.

FY20 View

For fiscal 2020, Cooper Companies continues to expect revenues within $2,767-$2,817 million, suggesting 5-7% growth at cc.

CVI revenues are expected between $2,070 million and $2,100 million (5.5-7% at cc).

CSI revenues are estimated in the range of $697-$717 million (3-6% at cc).

Adjusted EPS is projected within $12.80-$13.20. This compares to the previously communicated range of $12.60-$13.00.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Cooper Cos. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Cooper Cos. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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