Cooper Companies Posts Solid Q1 Results

Narrow-moat Cooper Companies COO posted solid first-quarter results. We are maintaining our fair value estimate of $359 per share.

First-quarter revenue grew by 10% organically year over year, or 9% as reported. Both key segments grew by 10% organically. CooperVision’s growth was spread evenly across regions, driven by consumer demand for daily silicone hydrogel lenses as well as an expanded portfolio range. CooperSurgical’s growth was broad-based across office and fertility. On the other hand, operating margin was down by 200 basis points mainly due to currency. Lingering freight and distribution issues that carried over from fiscal 2022 were largely resolved by the end of the first quarter, taking some of the weight off the firm’s supply chain challenges.

We remain optimistic about Cooper’s long-term picture. The firm is positioned to capture strong secular trends in two areas. On the vision side, management cited that 50% of the global population will have myopia or nearsightedness by 2050, up from roughly 34% today. In addition, a greater percentage of the vision market will prefer contacts. CooperVision sits among the strongest three players in the four-player contact lens industry and hasn’t shown any issues maintaining market share. In 2022, CooperVision grew by 11% while the industry grew by 9%. On the surgical side, fertility represents an increasingly large portion of sales. The U.S. Census Bureau’s median age that women gave birth reached 30 in 2019 up from 27 in 1990. Women delaying childbirth is a driver for fertility assistance and preservation services.

Cooper’s acquisition of Cook Medical’s Reproductive Health business is pending regulatory approval following a second request from the FTC. The firm is looking into making spinoffs from Cook to gain approval. Management refrained from mentioning specifics but expects a resolution by August.