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Stock To Watch: Cooper (COO) To See Upside Rewards On A Positive Outlook

 March 09, 2012 09:48 AM

Shares of medical instruments and supplier Cooper Companies (NYSE: COO) will open higher when the market opens on Friday on better than expected first quarter results. The company also provided upbeat outlook for 2012 on Thursday after the market closed sending the stock higher by 8 percent in the extended hours trading.

COO lifted its earnings projection for this year to $4.90 - $5.05 from $4.80 - $5.00 a share, but left revenues unchanged at 1.385 - $1.44 billion. Street analysts' are predicting Cooper to deliver earnings of $4.95 a share on revenues of $1.43 billion.

For the first quarter, the company reported net earnings of $54.6 million, up 40 percent from $39 million and earnings increased 35 percent to $1.12 a share from 83 cents a share in the year-ago quarter.

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Sales grew 11.3 percent to $326 million from $293 million in the prior year quarter. Analysts' had earnings predictions of $1.04 a share on revenues of $317.05 million.

Other positive factor is that gross margin improved year-over-year to 65 percent from 60 percent, as a result of savings from the closure of its Norfolk plant apart from better efficiencies and product mix. Sequentially, gross margin improved from 61.96 percent in the fourth quarter and 57.71 percent in the third quarter.

Similarly, operating margin improved year-over-year to 18.93 percent from 16.61 percent in the year earlier quarter. Sequentially also, operating margin grew from 18.46 percent in the fourth quarter and from 13.06 percent in the third quarter.

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The company delivered fifth straight quarters of double-digit revenues growth. This is due to its top line growing better than the markets and its investments in infrastructure providing necessary impetus.

For the second quarter, analysts have already revised their earnings forecast up by two cents to $1.17 a share from $1.15 a share estimated 90 days ago.

Significantly, while five analysts have Strong Buy rating, one analyst has Buy rating of Cooper shares. Five analysts have kept Hold rating, but no one analyst has the shares on  Sell or Underperform. These ratings were before the announcement of outlook and first quarter results which are likely to change to give effect to the company's revised outlook.

For the 52-week period, the stock traded between $52.60 and $84.20. The stock closed Thursday's regular trading at $78.93. The company got five star rating from Amit Bhalla of Citigroup and Steve Willoughby of Cleveland Research Co. for EPS accuracy for the trailing two years and four quarters.

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