This healthcare stock beat analysts’ estimates by six cents last quarter, and analysts are forecasting double-digit growth for the company for the next five years.
Cooper Companies (COO)
From Pivotal Point Trader
The Cooper Companies (COO) is not your typical growth stock. Its business is not sexy. Revenue and earnings growth is not off-the-charts. And it gets almost no coverage in the financial press.
Yet, quarter after quarter, Cooper shines as a starring member of our Pivotal Point Trader portfolio. That’s because it keeps growing its market share, operating margins and cash flow. It’s a winning combination.
It’s also no small feat, considering its primary businesses—women’s health and contact lenses—are not growing especially fast.
The shares look ready to start a new run higher.
Here’s why.
Cooper managers had the foresight to recognize that daily, disposable contact lenses were the future. In 2014, they engineered the $1.2 billion buyout of Sauflon Pharmaceuticals, a company with an extensive portfolio of disposable lens products. That is not only the fastest-growing business in the industry, but it is driving market-share gains at CooperVision.
During a September (Q3) conference call with analysts, chief exec Bob Weiss noted that daily silicone hydrogel lens sales grew 47%. This strength helped the division to post quarterly sales of $437 million, an 8% gain over Q2.
CooperVision added market share in all the markets in which it competes. It added 2% in the Americas. Gains were 11% in Europe, the Middle East and Africa. And Asia-Pacific saw market-share gains of 8%. Since 2012, CooperVision has increased its market share incrementally from 17.8% to more than 23%. While that growth is not dramatic, it is steady. You can count on it.
And the company continues to build its portfolio. During the just-ended quarter, Weiss noted the acquisition of Procornea. The company makes lenses for myopia (nearsightedness) sufferers. He believes myopia complications present the next big thing in contact lenses. Procornea brings its industry-leading Ortho-K technology to the CooperVision portfolio.
Grand View, a specialty market research and consulting company, says the global market for soft contact lenses will reach $12.48 billion by 2020. It bases this on increased incidents of myopia, hypermetropia (farsightedness) and astigmatism. The research also points to increased consumer penetration, as corrective glasses simply fall out of fashion.
CooperVision, given its portfolio, is best-positioned to capitalize.
Meanwhile, managers are strengthening the surgical business with strategic acquisitions. This week, Cooper announced the $1.1 billion acquisition of the Paragard IUD line from Teva Pharmaceuticals (TEVA). The deal brings $168 million in sales and steady cash flow to Cooper Surgical. It is also expected to be immediately accretive to gross operating margins and add 70 cents to 75 cents per share in earnings in the first full year.
IUDs represent a large and growing business in the contraceptive market. The brand is well-established within major healthcare systems. It broadens the surgical portfolio and fits Cooper’s strategic goal to identify emerging trends, then capitalize.
Since July, shares have consolidated gains. There is near-term support at $235 and minor resistance at $257.
Jon Markman, Pivotal Point Trader, issues@e.moneyandmarkets.com, 1-800-291-8545, September 13, 2017