Bearish stock to watch: Cooper Companies Inc (NYSE: COO)

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Cooper Companies Inc (NYSE: COO) stock fell over 6.7% on 5th June, 2020 pre-market session (Source: Google finance) after the company posted lower than expected results for the second quarter of FY 20. Due to the uncertainty on near-term financial results aroused by the COVID-19 pandemic, the company has not provided the fiscal year 2020 guidance. In the first quarter, fiscal quarter, the company felt the negative impact with the economies closing around the world throughout the quarter, but it was most significant in April with sales down about 45% for the month.

Further, there was effect of office closures on new fits. Generally, the new fits including trade-ups account for about 15% of the revenues and these eventually disappeared. The company estimated that this negatively impacted the company by around $40 million for the quarter. Secondly, the company experienced a reduction in channel inventory as retailers, distributors, and independent optometrists closed stores and offices and focused on liquidity, which was modestly offset by sales to pure Internet sellers. The company estimates that the negative impact of this activity was about $35 million. Lastly, the company saw a reduction in consumer consumption meaning people use their lenses less often as they extended the wear of their products or chose to wear glasses more often.

COO in the second quarter of FY 20 has reported the adjusted earnings per share of $1.51, missing the analysts’ estimates for the adjusted earnings per share of $2.13, according to the Zacks Consensus Estimate. The company had reported 20 percent decline in the adjusted revenue to $524.90 billion in the second quarter of FY 20, missing the analysts’ estimates for revenue by 10.02%. For CooperSurgical segment, the company has reported revenues of $123 million, down 27% for the quarter.

Additionally, in the second quarter of FY 20, the company had repurchased $47.8 million of common stock, roughly 160.8 thousand shares, according the existing share repurchase program at an average share price of $296.88.  The program has $359.7 million of remaining availability and there is no expiration date.

The company is projecting fiscal Q3 sales for CooperVision to be down in the range of 15% to 20% year-over-year, assuming a minimal rebound in channel inventory and a slow return in patient traffic as ECP slowly reopen stores. For the full fiscal Q3, the company forecast CooperSurgical’s revenues to be down 30% to 35%.

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