The Cooper Companies Inc.
) reported earnings and revenues for the fiscal third quarter
ended Jul 31, 2013, both of which surpassed the Zacks Consensus
Estimate. The company's adjusted earnings of $1.74 per share
exceeded the year-ago level of $1.45 by 20% as well as the Zacks
Consensus Estimate by 3 cents. On a reported basis, earnings per
share improved 31.6% to $1.79 from $1.36 a year ago.
Revenues in the quarter grew 8.9% to $412.0 million, ahead of the
Zacks Consensus Estimate of $410 million, thanks to the solid
CooperVision (CVI) and CooperSurgical (CSI) sales during the
quarter and their continued market share gains.
Gross margin improved 160 basis points to 65.1% from 63.5% in the
last year's fiscal third quarter. The increase was attributable
to lower royalty payments on silicone hydrogel lens sales,
product mix and increased manufacturing efficiencies, partially
offset by negative impact of currency, particularly the Japanese
Revenues in the
segment rose 5% (9% in constant currency) to $330.5 million.
Gross margin rose 200 basis points to 65% from 63% a year ago
driven by the same factors affecting the overall gross margin of
Revenues in the
segment surged 27% to $81.5 million, driven by positive impact
from the acquisition of Origio in Jul 2012. However, gross margin
dipped 300 basis points to 64% from 67% in the last year's
quarter due to lower margins associated with the acquisition of
Cooper exited fiscal second quarter with cash and cash
equivalents of $25.5 million as of Jul 31, 2013 compared with
$12.8 million as of Oct 31, 2012. Total debt decreased 34.8% to
$243.6 million as of Jul 31, 2013 from $373.7 million as of Oct
31, 2012. Consequently, debt-to-capitalization ratio decreased
540 basis points to 9.2% from 14.6% as of Oct 31, 2012.
COO generated $103.1 million of operating cash flow in the
quarter. The company spent $38.6 million as capital expenditure
yielding a free cash flow of $64.5 million in the third quarter.
For the fourth fiscal quarter, Cooper Companies expects total
revenues between $410 million and $425 million, including CVI and
CSI revenues of $330 million-$340 million and $80 million-$85
million, respectively. Both reported and adjusted earnings are
expected in the range of $1.76-$1.81 for the quarter.
For fiscal 2013, COO upgraded the lower range of its revenue
guidance to the range of $1,586 million-$1,601 million compared
with the earlier guidance of $1,575 million-$1,605 million,
comprising CVI revenues between $1,271 million and $1,281 million
(previously $1,260 million to $1,280 million) and CSI revenues
between $315 million and $320 million (previously $315 million to
Cooper Companies also upgraded its reported and adjusted earnings
per share guidance for the fiscal year. The company now expects
reported earnings in the band of $6.57 to $6.62 compared with the
earlier range of $6.42 to $6.52 and adjusted earnings in the
range of $6.23 to $6.28 compared with the earlier range of $6.15
Free cash flow is expected in the range of $180 million to
$210 million compared with the earlier range of $170 million to
$200 million. The company's guidance excludes the financial
impact for the proposed sale of Aime announced on May 31, 2013.
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The outlook for the contact lens industry is favorable. Trading
up to value-added lenses, such as silicone hydrogel or one-day
lenses, constitutes a major avenue for growth. A trade up to
1-day disposable lenses sharply increases per user sales and
profit. The company continues to grow sales at higher than market
Cooper Companies is a leader in the high-margin toric lens
market. It offers multiple designs of toric lenses across a wide
range of parameters, unlike some of its competitors, who offer
toric lenses in a limited number of designs.
However, Cooper Companies faces formidable competition in each of
its major product lines. Competition comes from well established
global contact lens makers. Depressed levels of consumer spending
have heightened the company's competitive pressures.
Currently, COO carries a Zacks Rank #2 (Buy). Other medical
stocks that also worth a look include
STRAUMANN HLD N AKT
) with a Zacks Rank #1 (Strong Buy), and
Alphatec Holdings, Inc.
Align Technology Inc.
), both with a Zacks Rank #2 (Buy).