Momentum Stock: The Cooper Companies, Inc.

The Cooper Companies Inc. (COO: 56.66 -0.27 -0.47%) just hit a new multi-year high at $59.11 after reporting an impressive Q4 earnings surprise of 20% in early December. With estimates up on the news and the valuation picture in check, this Zacks #1 rank stock has its sights set on momentum.

Company Description

The Cooper Companies, Inc., through its subsidiaries, develops and manufactures vision and women's health products. The company's products include contact lenses and medical devices like diagnostic and surgical equipment used primarily by gynecologists and obstetricians. Cooper Companies was founded in 1980 and has a market cap of $2.6 billion.

Cooper Companies gave its investors reason to cheer on December 7 with strong Q4 results that came in ahead of expectations and put a rubber stamp on a great year for the healthcare-products company.

Fourth-Quarter Results

Revenue for the quarter was up 11% from last year to $313 million. Earnings looked even better at $1.04, 21% ahead of the Zacks Consensus Estimate.

Most of Cooper's revenue comes from it vision segment, where total sales were up 10% from last year to $263 million. From that group, it's Toric products, also known as soft contact lenses, saw the biggest gains, up 14% to $78 million. Its highest revenue product from this segment, non single-use sphere, was up a solid 10% to $110 million.

In terms of regions, Visions biggest gain came from its biggest region, Americas, up 47% to $124 million. It's Asia business, representing less than 20% of total revenue, was up a respectable 6% to $48 million.

Cooper's smaller division, women's medical products, was up 14% to $50 million.

Not only were sales strong, costs and expenses were down, with gross margin showing a big gain to 60% from 56% last year. Operating margin was 20%, looking strong in both categories.

Balance Sheet

Buying a bunch of small companies and combining them underneath one umbrella can be expensive, and it shows up in Cooper's balance sheet, with total debt of $611 million, down $35 million from last year, and nominal cash and equivalents of $3.5 million.

Estimates

We saw some decent movement in estimates off the good quarter, with the current year gaining 26 cents to $3.46 while the next-year estimate added 28 cents to $3.84.

Valuation

With a forward P/E of 16.5X, COO trades at a slight premium to the industry average of 13.5X.

6-Month Chart

On the chart, COO jumped higher on the strong quarter, hitting a new multi-year high at $59.11. But in spite of the gains, the stochastic below the chart is signaling that shares are trading far away from over-bought conditions. Look for support from the longer-term trend on any weakness, take a look below.

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Momentum Trader Service.
 
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