Why Is Cooper Cos. (COO) Up 17.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Cooper Cos. (COO). Shares have added about 17.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cooper Cos. due for a pullback? 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 drivers.

Cooper Companies Q2 Earnings & Revenues Top Estimates

The Cooper Companies, Inc. reported second-quarter fiscal 2019 adjusted earnings of $2.94 per share, which surpassed the Zacks Consensus Estimate of $2.76 by 6.5%. The bottom line also increased 2.8% on a year-over-year basis.

Revenues came in at $654.3 million, outpacing the Zacks Consensus Estimate of $653.3 million by 0.2%. On a year-over-year basis, the top line improved 3.6%.

This California-based specialty medical device company currently carries a Zacks Rank #3 (Hold).

Q2 Segment Details

CooperVision (CVI)

This segment’s revenues totaled $484.2 million, up 8% on a pro-forma basis and 4% on a reported basis.

Per management, the segment saw a noticeable uptick in the Single-use sphere lenses (28% of CVI), reflecting pro-forma growth of 14%, driven by accelerating growth in both Clariti and MyDay. Single-use sphere lenses revenues totaled $135.3 million.

Toric (32% of CVI) revenues totaled $155.3 million, up 7% on a pro-forma basis.

Multifocal (10% of CVI) generated revenues of $49.7 million, up 6% at pro forma and 1% year over year.

Non single-use sphere (30% of CVI) revenues came in at $143.9 million, up 4% at pro forma and 1% from the year-ago quarter.

Geographically, the segment witnessed an improvement in revenues in the Americas (40% of CVI), up 5% at pro forma and 5% year over year to $193.4 million.

EMEA revenues (37% of CVI) totaled $181.1 million, up 8% at pro forma but down 1% from the prior-year quarter.

Asia Pacific sales (23% of CVI) rose 14% at pro forma and 9% year over year to $109.7 million.

CooperSurgical (CSI)

This segment posted revenues of $170.1 million, up 6% at pro forma and 4% year over year.

Sub-segment Office and Surgical products (62% of CSI) accounted for $105.7 million revenues, up 7% at pro forma and 8% on a year-over-year basis.

Fertility (38% of CSI) revenues were $64.4 million, down 2% year over year but up 5% at pro forma.

Margin Analysis

In the fiscal second quarter, gross profit was $432.6 million, up 6.9% year over year. Gross margin was 66% of net revenues, up 200 basis points (bps) year over year.

On an adjusted basis, gross margin was 67%, down 100 bps year over year. The gross margin contraction was due to currency headwinds.

Operating income in the quarter was $146.9 million, up a whopping 96.7% year over year. Operating margin was 22.5%, up 1070 bps from the prior-year quarter.

FY19 Guidance Revised

Cooper Companies updated its fiscal 2019 guidance. The company expects adjusted revenues in the $2.63-$2.67 billion band compared with $2.63-$2.68 billion projected earlier. The mid-point of the current range of $2.65 billion is below the current Zacks Consensus Estimate of $2.66 billion.

Cooper Companies expects adjusted earnings per share in the $12.15-$12.35 band compared with the previous guidance of $11.85-$12.15. The mid-point of $12.25 is higher than the current Zacks Consensus Estimate of $12.01.

Notably, revenues from CVI are expected between $1,964 and $1,985 million, lower than $1,968 million and $1,995 million anticipated earlier.

Revenues from CSI are anticipated within $669-$682 million, up from the previous guidance of $663-$681 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

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. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Cooper Cos. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.