Needham Upgrades Cooper Companies (COO) to Buy

Needham analyst David Saxon upgraded Cooper Companies (NASDAQ: COO) from Hold to Buy with a price target of $94.00.

The analyst comments "Last week, we hosted investor meetings with Dan McBride (COO) and Kim Duncan (VP, IR and Risk Management). We come away more positive on CVI's growth outlook, CSI trends, and COO's FY26 EPS potential. We believe a dislocation between the company's valuation and fundamentals has created an attractive entry point, leading us to upgrade COO to a Buy rating with a $94 price target. Contact lens market growth is tracking in the mid- to upper-end of COO's assumed range. The contact lens market growth slowed in C1Q25 to 4% from 9% in C4Q24. While COO grew above this and saw organic growth improve sequentially, management lowered its market growth assumption embedded in CooperVision's (CVI) FY25 revenue guidance to 4-6% from 5-7%. Importantly, market growth seems to be tracking in the mid- to upper-end of this range and CVI's growth premium vs. the market should be ~150 bps at the mid-point. COO believes the market is seeing consumers change order patterns (e.g. buying 3 months vs. 12 months) and distributors adjust inventory levels modestly. Importantly, fit volumes remain strong, which should flush out any potential channel inventory dynamics in COO's F3Q25. COO has seen premium lenses outperform, which suggests consumers are indeed only adjusting order patterns and not trading down. On a volume basis, the dailies/FRP market mix is 40%/60% and the dailies mix should continue to grow given the fitting mix is 50%/50%. COO's dailies share is 21% (vs. its FRP share in the 30%s) and management believes it can reach mid- to high-20%s overtime. COO remains committed to low-double digit constant currency operating income growth. Importantly, our sense is COO could be able to achieve this in FY26 inclusive of the tariff rates as of its F2Q25 call. Given recent FX rates, COO's focus on debt repayment to reduce interest expense, and incremental share repurchases, we believe reported EPS growth should be stronger (vs. consensus modeling high-single digit FY26 EPS growth). COO has started to focus on capturing synergies between CVI and CooperSurgical (CSI), which have historically had largely separate infrastructures. This includes leveraging back office functions (IT, etc.) which should result in margin expansion potential. Dislocation between valuation and fundamentals has created an attractive entry point; upgrading COO to a Buy rating. We believe COO's valuation is baking in a Bear case scenario, resulting in a favorable risk/reward and leading us to upgrade COO to a Buy rating with a $94 price target (21x our CY26 EPS). COO shares trade at 15.6x our 2026E EPS, a 19% discount to its large-cap peers, which trade at a median 2026E P/E multiple of 19.3x. COO shares trade at a next-twelve-months (NTM) P/E of 16.5x, which is a 29% discount to its ten-year average NTM P/E of 23.2x."

For an analyst ratings summary and ratings history on Cooper Companies click here. For more ratings news on Cooper Companies click here.

Shares of Cooper Companies closed at $69.74 yesterday.

You May Also Be Interested In

• Kepler Cheuvreux Upgrades Koninklijke KPN NV (KPN:NA) (KKPNY) to Buy
• Alimentation Couche-Tard Inc (ATD/B:CN) (ANCUF) PT Raised to Cdn$104 at UBS
• KeyBanc Upgrades Nucor (NUE) to Overweight