Cooper Companies (COO) Earnings Miss & Revenues Beat in Q3

The Cooper Companies COO reported third-quarter fiscal 2018 earnings of $3.00 per share, missing the Zacks Consensus Estimate by 2.6%. However, earnings increased 13.6% on a year-over-year basis.

The California-based specialty medical device company reported revenues worth $660 million, surpassing the Zacks Consensus Estimate of $653.4 million. On a year-over-year basis, revenues improved 18.7%. Per management, this was an all-time high for Cooper.

In a year’s time, Cooper’s shares have rallied 5.2% against the industry’s 15.1% rise.

The stock currently carries a Zacks Rank #3 (Hold).

Segment Details

Cooper reports revenues through two major segments — CooperVision (CVI) and CooperSurgical (CSI).

CVI

This segment garnered revenues worth $489.1 million, up 9% on a pro forma basis and 12% year over year. Per management, Cooper saw a significant uptick in daily silicone hydrogel lenses with pro forma growth of 43%, driven by solid worldwide growth of MyDay and clarity.

Toric (31% of CVI) revenues totaled $153.6 million, up 9% on a pro forma basis and 11% year over year. Multifocal (11%) generated revenues worth $52.7 million, up 10% at pro forma and 13% year over year.

Single-use sphere (28%) posted revenues worth $137.6 million, which shot up 17% at pro forma and 19% from a year ago. Non single-use sphere (30%) revenues came in at $145.2 million, up 1% at pro forma and 7% from a year ago.

Geographically, the segment saw an improvement in U.S. revenues (38%), up 8% at pro forma and 9% year over year to $184.4 million. Per management, growth in the United States was driven by clariti and MyDay strength.

EMEA revenues (41%) were $199.2 million, up 6% at pro forma and 11% from the prior-year quarter. Management attributed the upside to Cooper’s Biofinity and Avaira suite of products.

Asia Pacific sales (21%) rose 14% at pro forma and 19% year over year to $105.5 million on a strong show by silicone hydrogel dailies and Biofinity.

CSI

This segment posted revenues of $170.9 million up 6% at pro forma and 44% year over year. Per management, growth was led by a strong 9% rise in PARAGARD.

Sub-segment Office and Surgical products (61% of CSI) accounted for $104.4 million, up 8% at pro forma and a whopping 96% on a year-over-year basis. Fertility (39%) posted sales worth $66.5 million, up 2% year over year and 4% at pro forma.

Margin Analysis

As a percentage of revenues, adjusted gross margin at the CSI segment was 72%, up from 62% of the year-ago period.

As a percentage of revenues, adjusted gross margin at the CVI segment was 66%, up 100 basis points (bps) in the reported quarter.

In the fiscal third quarter, gross profit as a whole for the company totaled $426.8 million, up 19.8% year over year. Adjusted gross margin was 67%, up 200 bps from year-ago quarter. Per management, gross margin was favorably impacted by manufacturing efficiencies, product mix and the addition of PARAGARD within CSI.

Operating income in the quarter totaled $115.6 million, up 2.5% year over year. Adjusted operating margin was 28%, up 200 bps from the prior-year quarter.

Guidance

Cooper updated its fiscal 2018 guidance.

For fiscal fourth quarter, revenues are expected within $634-$649 million, reflecting 6% to 9% growth at pro forma. The Zacks Consensus Estimate is pegged at $654.8 million, above the guided range.

CVI revenues are expected within $468-$477 million, showing pro forma growth of 8% to 10%. The same for CSI is expected in the range of $166-$172 million, reflecting pro forma growth of 3% to 6%.

Adjusted earnings per share for the quarter are projected between $2.90 and $3.00. The Zacks Consensus Estimate stands at $3.08, above the range.

For fiscal 2018, revenues are expected between $2,515 million and $2,530 million. The Zacks Consensus Estimate is pegged at $2.53 billion, the high end of the guided range.

CVI revenues are expected between $1,869 million and $1,878 million, while the same for CSI is within $646-$652 million.

Adjusted earnings per share for fiscal 2018 are expected within $11.55-$11.65. The Zacks Consensus Estimate is pinned at $11.81, above the projected range.

Our Take

Cooper exited the fiscal third quarter on a tepid note. However, the company saw solid segmental gains. Cooper continues to gain from the PARAGARD acquisition which has consistently driven CooperSurgical. CooperVision also saw a strong quarter with solid performance in the United States, EMEA and Asia Pacific. A significant expansion of the gross and operating margins also buoy optimism. Management is also optimistic about the clarity, MyDay and Biofinity suite of products which have seen a solid quarter. The company’s portfolio of daily silicone hydrogel lenses makes it one of the stalwarts in the soft contact lens market. The company’s focus on the IVF clinics, owing to its strong fertility portfolio, also paints a bright picture. A strong guidance for fiscal 2018 is an added positive.

On the flip side, sales of Avaira declined in the quarter. Foreign exchange volatility persists as well. Moreover, a series of acquisitions pose significant integration risks. Stiff competition in the niche space adds to the woes.

Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which also reported solid earnings this season, are Illumina, Inc ILMN, Integer Holdings Corporation ITGR and Intuitive Surgical, Inc ISRG.

While Illumina and Integer Holdings sport a Zacks Rank #1 (Strong Buy), Intuitive Surgical has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Illumina reported adjusted earnings of $1.43 per share, beating the consensus mark of $1.11.

Integer Holdings posted adjusted earnings of $1.06 per share in the second quarter of 2018, which exceeded the Zacks Consensus Estimate of 90 cents.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which outpaced the Zacks Consensus Estimate of $2.48 and improved 38% year over year.

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