Why Is Cooper Companies (COO) Down 7.7% Since the Last Earnings Report?

More than a month has gone by since the last earnings report for The Cooper Companies, Inc. COO. Shares have lost about 7.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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 Beats Earnings Estimates in Q3

Cooper Companies reported adjusted earnings of $2.64 in third-quarter fiscal 2017, surpassing the Zacks Consensus Estimate by 6 cents and improving from $2.30 in the year-ago quarter. We believe that the upside was driven by robust revenue growth.

Revenues increased to $556 million from $515 million recorded in the prior-year quarter. The figure also beat the Zacks Consensus Estimate of $552 million. Solid top-line performance was driven by innovative products like Biofinity and daily silicone hydrogel lenses.

Revenue Segments

The Cooper Companies has two business segments – CooperVision (CVI) and CooperSurgical (CSI).

CooperVision Segment: CVI revenues increased 8% at constant currency (cc) to $437.3 million on a year-over-year basis. Revenues continue to gain from the company’s silicone hydrogel lenses led by solid prospects in the MyDay, Clariti and Biofinity platforms. Coming to the major catalysts within the CVI segment, robust performance by Toric (31.6% of CVI revenues), Multifocal (10.7% of CVI revenues), Single-use sphere lenses (26.5% of CVI revenues) and Non single-use sphere lenses (31.2%) propelled solid growth.

Multifocal revenues rose 7% at cc to $46.8 million, while Toric revenues increased 11% at cc to $138.3 million on a year-over-year basis. Single-use sphere lenses sales climbed 14% at cc to $115.8 million, while sales of non single-use sphere lenses inched up 2% at cc to $136.4 million year over year.

Geographically, CVI revenues increased 2% in the Americas, while revenues from the Asia Pacific and EMEA rose 13% year over year at cc.

CooperSurgical Segment: CSI revenues jumped 4% at cc to $118.7 million on a year-over-year basis.

Coming to the CSI segment, the fertility category witnessed a 6% rise (at cc) in sales in the reported quarter on a year-over-year basis, totaling $65.5 million. However, the office and surgical products category at the CSI segment inched up 1% at cc to $53.2 million.

Margin Details

Adjusted gross margin in the reported quarter was 65% of revenues as compared with 64% registered in the year-ago quarter. The gross margin improvement was fueled by favorable product mix within the CooperVision segment, improved margins at CooperSurgical segment, and favorable foreign exchange.

Adjusted operating margin, as a percentage of revenues, was 26% in the fiscal third quarter flat on a year-over-year basis.

Guidance

Fiscal 2017: For fiscal 2017, total revenue is expected in the band of $2,129–$2,142 million, up from the previously issued range of 2,110–$2,135 million.

Revenues at the CVI segment are estimated between $1,670 and $1,680 million, up from the previously guided range of $1,645 million and $1,665 million, while CSI revenues are projected in the range of $459 - $462 million, a little lower from the previously guided range of $465–$470 million.

Meanwhile, adjusted earnings are anticipated in the band of $9.66–$9.76, up from the previously provided range of $9.50–$9.65 per share.

Fourth Quarter: The Cooper Companies expects revenues in the range of $552 million to $565 million. CVI revenues are expected between $435 million and $445 million, while CSI revenues are anticipated between $117 million and $120 million. The company expects adjusted earnings per share between $2.60 and $2.70.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter. While looking back an additional 30 days, we can see even more upward momentum. There have been three upward revisions in the last two months.

The Cooper Companies, Inc. Price and Consensus

 

 

The Cooper Companies, Inc. Price and Consensus | The Cooper Companies, Inc. Quote

VGM Scores

At this time, Cooper Companies' stock has an average Growth Score of C, however its Momentum is doing a lot better with an A. 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.

Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.

Outlook

While estimates have been moving upward, the magnitude of the revision is net zero. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.

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