Analyst Says Cooper is Poised to Gain Market Share

A KeyBanc Capital Markets analyst has increased his price target on Cooper Cos. (COO) , saying the medical device company is poised to gain market share and has multiple drivers of gross margin improvement.

Analyst Matthew Mishan upped his price target to $221 from $199 after investor meetings with management. He retained his overweight rating on the stock.

Shares of Cooper were trading at $179.49 on Friday afternoon, up nearly 2%. The stock is up nearly 34% year-to-date.

In a note on Friday, Mishan said a near-term distribution issue stemming from an IT implementation appears to be largely behind the company. Mishan said he views the "noise around a NT distribution issue opportunistically" and is focusing instead on the company's product momentum, among others.

Cooper has regained product momentum over the last several quarters and is well poised for market share gains, Mishan wrote.

In addition, he noted the "potentially distracted competitive landscape," pointing to Johnson & Johnson's (JNJ) deal, announced Sept. 16, to buy Abbott Laboratories' (ABT)   medical optics business for $4.325 billion. In addition, he mentioned the restructuring at Novartis' (NVS) Alcon unit, and the implications of Valeant Pharmaceuticals International's (VRX) "issues on B&L's [Bausch & Lomb Inc.] ability to fund growth."

Pleasanton, Calif.-based Cooper has two business units: CooperVision, which makes spherical, toric and multifocal contact lenses, and CooperSurgical, a provider of medical devices to the women's health care segment.

In the note, Mishan wrote that Cooper benefits from a lower British pound and may also benefit from factors including the full-year impact of the CIBA Vision royalty expiration.

With free cash flow expected to inflect higher over the next several years,  Mishan said the company will likely focus on growth investments including organic and M&A, while opportunistically using share buybacks.

On M&A, Mishan said in an interview that the company will likely focus on bolt-on deals in its surgical and vision units. On the vision side, an example of an asset that could be of interest is one with an Asian footprint, Mishan said.

Cooper on Sept. 1 reported third quarter adjusted earnings per share of $2.30 on revenue of $514.7 million. Analysts had forecast adjusted EPS of $2.28 on revenue of $511.25 million, according to Bloomberg.

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