The Cooper Companies (COO) Beats Q4 Earnings Estimates

The Cooper Companies Inc. (NYSE:COO) reported adjusted earnings of $2.28 in fourth-quarter 2016, surpassing the Zacks Consensus Estimate by 4 cents and improving 14% on a year-over-year basis. We believe that the upside was driven by robust revenue growth.

Share Price Trends

Shares of this Pleasanton, CA-based medical device company have had an impressive run on the bourse over the past one year. Year to date, The Cooper Companies gained 25.48%, well ahead of the Zacks categorized Medical/Dental-Supplies sub-industry's negative return of 10.42% and S&P 500’s return of 9.9%.

However, post earnings release, shares witnessed a nominal decline of almost 0.3% to close at $167.80 .

Business Details

Revenues increased 14% year over year (up 10% at constant exchange rate or CER, including acquisitions in both periods) to $518.7 million, crushing the Zacks Consensus Estimate of $505 million.

Coming to the full-year results, The Cooper Companies reported revenues of $1,966.8 million, up 9% on a year-over-year basis. In fact, adjusted earnings of $8.44 per share surpassed the year-ago figure by a notable 13%.

CooperVision Segment

CooperVision (CVI) revenues increased 10% to $411.7 million (up 11% at CER) on year over year.

Coming to the major growth catalysts within the CVI segment, robust performance by Toric (31% of CVI revenues), Multifocal (10% of CVI revenues) and Single-use sphere lenses (27% of CVI revenues) propelled solid growth.

In fact, multi focal revenues rose 10% to $42.6 million, while Toric revenues increased 14% to $126.1 million on a year-over-year basis. Coming to the sphere lenses, single-use sphere lenses’ sales climbed 17% to $110.4 million, while sales of non single-use sphere lenses were up 2% to $132.6 million year over year.

Geographically, CVI revenues increased 8% in the Americas, 5% in Europe, Middle East and Africa (EMEA), while in the Asia Pacific, revenues surged 27% year over year.

Meanwhile, for fiscal 2016, the company reported revenues of $1,577.2 million in the CVI segment, up 7.5% from fiscal 2015 in constant currency.

CooperSurgical Segment

CooperSurgical (CSI) revenues witnessed a 30% jump (up 6% at CER) to $106.9 million on a year-over-year basis.

Coming to the CSI segment, the fertility category witnessed a 74% surge in sales in the reported quarter, on a year-over-year basis, totaling $52.3 million. However, the office and surgical products category at the CSI segment increased 5% to $54.6 million year over year.

Margin Details

Adjusted gross margin expanded 150 basis points (bps) on a year-over-year basis to 57.1%, on the back of favorable currency and product mix. Adjusted operating margin, as a percentage of revenues was 25% compared to 24% in the year-ago quarter. The major reason behind the upside is an upbeat gross margin.

Guidance

For fiscal 2017, total revenue is expected in the band of $2,090–$2,130 million.

Notably, revenue in the CVI segment is expected to be between $1,620 million and $1,650 million, while CSI revenue is projected in the range of $470–$480 million.

Meanwhile, adjusted earnings are anticipated in the band of $9.00–$9.30 per share for the fiscal.

For first-quarter 2017, adjusted earnings per share are projected in the band of $1.78–$1.88. CVI revenues are expected between $383million and $393 million, while CSI revenues are anticipated between $111 million and $115 million.

Net revenues are forecasted in the range of $494–$508 million.

Financial Condition

Total debt for the company decreased $110.3 million to $1,333.8 million, thanks to significant operational cash flow generation. In this regard, cash provided to the company from operations is $193.4 million. Net capital expenditure in the quarter is valued at $35.3 million, which caused a free cash flow of $158.1 million.

Our Take

Taking the stellar performance of the stock into consideration, we expect The Cooper Companies to propel further in the coming quarters. In this regard, a positive long-term growth of 11.8% holds promise.

However, a dismal estimate revision trend indicates looming concerns ahead as one estimate has moved downward for the current year in the last seven days.

Of the notable developments, The Cooper Companies recently joined the S&P 500 Global Industry Classification Standard (GICS) Health Care Supplies Sub-Industry index earlier this year, a significant positive in our view.

Zacks Rank & Key Picks

Currently, The Cooper Companies has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector include Addus HomeCare Corporation (NASDAQ:ADUS) , LHC Group, Inc. (NASDAQ:LHCG) and HMS Holdings Corp. (NASDAQ:HMSY) . Addus HomeCare and LHC Group sport a Zacks Rank #1 (Strong Buy), while HMS Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Addus HomeCare has a long-term expected earnings growth rate of approximately 15%. Notably, the stock represents an impressive one-year return of almost 43.9%.

LHC Group has a long-term expected earnings growth rate of 15%. The company has returned almost 20.5% in the last three months.

HMS Holdings has an expected earnings growth of almost 14.3%. The company posted a promising year-to-date return of almost 52.1%.

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