F2Q Likely An Anomaly; COO Preparing To Show Investors With F3Q Results

The Cooper Companies (NYSE:COO) became known as a “sleep at night” stock, with this leading contact lens provider beating estimates 8 quarters in a row. However, the company missed expectations when it reported fiscal 2Q results (period ended April 2012), disappointing investors and causing the shares to trade well below their previous high. COO reached nearly $90 per share earlier this year on prospects for steady growth and earnings upside, but since the earnings miss, faith has been shaken for this Buy-and-Hold story. COO shares weakened after earnings, with the market overlooking the potential for the company to snap back quickly from the challenges in the prior quarter. COO management noted on its fiscal second quarter (F2Q) earnings call that weak U.S. contact lens demand in April rebounded nicely in May, and company sources are saying that the business has since been strong as the company heads into F3Q earnings (COO is set to report September 4th). Like most companies with overseas sales, the impact from foreign exchange also hurt both revenue and earnings in F2Q, however, this should not be an issue going forward as the strong Dollar and strengthening of the Pound vs. the Euro, which negatively impacts COO’s manufacturing costs, are fully factored into expectations and guidance. After the surprise miss, COO has been placed in the penalty box and is now a “show me” story. The bet here is that a strong F3Q report, which seems likely, could propel the shares back to their 52-week high and beyond. Analysts are starting to come around, with JP Morgan upgrading the shares today and raising earnings estimates and its price target on COO from $92 to $96.