Key Takeaways:
Cooper Cos. shares surged 7.2% after the medical device maker said multiple parties are interested in buying its CooperSurgical unit.
"There's nothing now holding us back from being able to move very quickly," Chief Executive Officer Al White said on the earnings call, referring to the sale process.
The update accompanied Cooper's fiscal second-quarter results, released after Thursday's close. Adjusted earnings came in at $1.21 a share, up from 96 cents a year earlier and above the $1.13 consensus estimate. Revenue rose 8% to $1.08 billion, topping the $1.06 billion analyst forecast, according to FactSet.
The stock traded at $66.47, on track for its third straight gain and a more than 10% rally over that stretch. Still, shares are down about 18% this year. The potential sale of CooperSurgical, which has been a legal and financial drag, could unlock significant value. White said proceeds would likely go toward share buybacks.
CooperSurgical recalled three lots of embryo culture solution used for in vitro fertilization in late 2023 after investigations showed the solution was missing magnesium, causing embryos to stop developing or die. The company said it has reached agreements to resolve essentially all claims tied to the recall, which cost about $272 million.
The resolution removed a key overhang that had complicated the strategic review Cooper initiated last year, White said, allowing "round two" of sale discussions to proceed. KeyBanc analysts Brett Fishbin and William Korner wrote that the strategic review update is what's driving the stock higher, adding that investors are pleased with the progress.
Cooper reiterated its full-year profit guidance of $4.58 to $4.66 a share, compared with the $4.62 Wall Street estimate. However, it lowered its revenue outlook to a range of $4.28 billion to $4.32 billion from $4.31 billion to $4.35 billion, versus the $4.31 billion consensus.
J.P. Morgan analyst Robbie Marcus maintained his Neutral rating but lowered his price target to $71 from $80, noting that the strategic review update and messaging about buybacks "should be enough to put a floor on the share price."
The CooperSurgical sale, if completed, would mark a significant shift in Cooper's corporate structure, removing a business that has weighed on both earnings and sentiment. Investors will watch for further updates on the sale process, which White said could move quickly now that litigation is resolved.
This article is for informational purposes only and does not constitute investment advice.
