The Cooper Companies Inc.
) climbed 1.7% following its fiscal 2014-second-quarter (ended Apr
30, 2014) earnings release. Adjusted earnings per share scaled up
9.3% to $1.64 from the year-ago level of $1.50 and beat the Zacks
Consensus Estimate by 3 cents.
Revenues came in at $412.3 million, reflecting a rise of 7.4% from
the year-ago quarter and were in line with the Zacks Consensus
Estimate of $412 million. Revenues went up 9% in constant currency,
excluding the divestiture of Aime (CooperVision's rigid gas
permeable contact lens and solutions business in Japan).
Margins & Expenses
Gross profit increased 5.6% to $268.5 million in the quarter.
However, gross margin slid 110 basis points (bps) to 65.1% compared
with 66.2% in the last year's quarter. Gross margin was impacted by
the product mix and start-up costs associated with MyDay.
Selling, general and administrative (SG&A) expenses went up
3.4% to $155.8 million while research and development (R&D)
expenses increased 12.5% to $16.3 million.
Adjusted operating earnings augmented 10.4% to $89.9 million, while
adjusted operating margin improved 60 bps to 21.8% compared with
21.2% in the second quarter of the prior fiscal year. The
improvement in margins was driven by operating expenses leverage.
Revenues in the
(CVI) segment rose 7% (9% in constant currency and excluding the
divestiture of Aime) to $331.1 million. The segment continued to
gain share across all geographies driven by COO's silicone hydrogel
products, especially Biofinity and MyDay. Gross margin contracted
200 bps to 65% owing to planned costs associated with MyDay.
Revenues in the
(CSI) segment spiked 8.7% to $81.2 million, led by growth in its
fertility business. However, gross margin remained flat year over
year at 65% as the positive impact of the higher margin base
business was offset by the lower margin fertility business which
continues to become a larger part of the product mix.
COO exited the second quarter with cash and cash equivalents of
$82.7 million as of Apr 30, 2014, up 6.8% from $77.4 million as of
Oct 31, 2013. Total debt decreased 2.7% to $335.4 million as of Apr
30, 2014 from $344.7 million as of Oct 31, 2013. Consequently, the
debt-to-capitalization ratio declined 90 bps to 11.6% from 12.5% as
of Oct 31, 2013.
In the quarter, COO's cash flow from operations totaled $126.3
million, up 9.9% from $114.9 million in the year-ago quarter.
Capital expenditures surged 60.2% to $61.2 million from $38.2
million in the previous year quarter. As a result, free cash flow
dropped 15.9% to $65.1 million from $77.4 million a year ago.
For fiscal 2014, earnings are expected in the band of $6.78 to
$7.00 compared with the earlier range of $6.75 to $7.00, while
adjusted earnings are projected in the $6.80-$7.00 range compared
with the prior range of $6.75 to $7.00. The current Zacks Consensus
Estimate of $6.89 lies within the guided range.
COO continues to expect total revenue between $ 1,685 and $1,725
million for the year, including CVI and CSI revenues of
$1,365-$1,395 million and $320-$330 million, respectively. The
current Zacks Consensus Estimate of $1,712 million lies within the
We are impressed with COO's second-quarter results that beat
earnings estimates. COO also upgraded the lower-end of its earnings
outlook for fiscal 2014. COO continues to gain market share driven
by consistent progress with MyDay and growth at the Biofinity and
Avaira product families.
However, COO faces formidable competition in each of its major
product lines. Competition emanates from well-established global
contact lens makers.
Currently, COO retains a Zacks Rank #2 (Buy). Other well-performing
stocks in the medical/dental supply industry that warrant a look
Milestone Scientific Inc.
West Pharmaceutical Services, Inc.
). All these stocks carry the same Zacks Rank as COO.
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