Cooper Beats, Profits Rise - Analyst Blog

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The Cooper Companies ( COO ), a company dedicated to contact lens and women's health, reported fourth-quarter fiscal 2011 (ended October 31) results with adjusted earnings per share of $1.46 comfortably beating both the Zacks Consensus Estimate of $1.21 and the year-ago earnings per share of $1.09. Net income (as reported) for the quarter jumped 17.4% year over year to $56.6 million (or $1.15 a share).

For fiscal 2011, earnings per share of $4.50 again beat the Zacks Consensus Estimate of $4.23 as well as the year-ago figure of $3.10.

Revenue Analysis

Revenue for the quarter was up 15% (12% in constant currency) year over year to $360.9 million, ahead of the Zacks Consensus Estimate of $359 million. Sales were $1,330.8 million for the fiscal, up 15% y/y, beating the Zacks Consensus Estimate of $1,329 million.

Revenue from the contact lens division ("CVI") was higher 15% (11% in constant currency) year over year to $304 million. Sales were higher, for all types of lenses, with mainstay toric lenses (up 15%), single-use sphere lenses (higher 19%) and non-single-use sphere lenses (up 15%) doing well, while multifocal sales were up more marginally.

On a geographic basis, revenue from EMEA and Asia-Pacific was up 8% and 44%, respectively, and increased 10% in the Americas. On a material basis, revenue of silicone hydrogel was up a sharply 41% to $102.7 million while Proclear sales increased moderately 9% to $79.5 million.

The smaller women's health segment ("CSI") continued to perform fairly well with revenues rising 14% year over year to $56.9 million. Sales of this segment received a fillip from surgical procedures, which increased 24% to $20.7 million.

Margin Trends

Cooper's gross margin rose to 62% in the quarter from 60% a year ago, on account of enhanced manufacturing synergies and shift in product mix, partially offset by provisions for Avaira recall and a reserve for inventory. Operating margin dropped to 18% from 20% in the prior-year quarter due to the Avaira recall and resolution of the Rembrandt patent litigation. Excluding the two items, operating margin would have been 23%.

Financial Health

Cooper finished the quarter with cash and cash equivalents of only $5.2 million, up 44.8% year over year. The company continues to de-leverage as total debt fell 37.8% year over year, to $380.4 million in the quarter.

Cooper generated $111 million of operating cash flow in the quarter and spent $32.5 million on capital expenditure, yielding free cash flow of $78.5 million.


Cooper initiated guidance for fiscal 2012. It expects total revenue of $1,385 million to $1,440 million comprising CVI of $1,170 million to $1,210 million and CSI of $215 million to $230 million.

Both reported and adjusted earnings are forecast in the range of $4.80 to $5.00 a share. Free cash flow is projected in the range of $200 million to $230 million for fiscal 2012.

Cooper is a global medical products company specializing in a wide range of contact lenses for the vision correction market with a smaller strategic business unit for women's health. It reportedly holds the number three position in the $6 billion global contact lens industry.

The company 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. The company is benefiting from strong demand for its Biofinity toric lenses.

However, Cooper faces formidable competition in each of its major product lines. Competition comes from well established global contact lens makers such as Johnson & Johnson ( JNJ ) and Novartis ( NVS ). Depressed levels of consumer spending have heightened the competitive pressures on the company. Our Neutral recommendation on the stock is backed by a short-term Zacks #3 Rank (Hold).

COOPER COS ( COO ): Free Stock Analysis Report

JOHNSON & JOHNS ( JNJ ): Free Stock Analysis Report

NOVARTIS AG-ADR ( NVS ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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