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01/11 04:07
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates positive sentiment with strong product development, optimistic revenue guidance, and expected market share gains. The strategic plans for MyDAY and MiSight, along with anticipated operating margin expansion and free cash flow improvements, contribute to this outlook. Despite some gross margin pressure, the overall sentiment from the call, including analyst reactions, suggests a positive impact on stock price.
Consolidated Revenues $1.065 billion, up 4.6% year-over-year or up 3.4% organically. Reasons for change include improved global availability of MyDay lenses and strong performance in certain regions.
Operating Margins Improved meaningfully to a 27% margin, with operating income increasing by 9%. This was driven by disciplined cost management and efficiency improvements.
Non-GAAP Earnings Grew 11% to $1.15. Reasons include significant cost savings from reorganization and operational efficiency.
Free Cash Flow $150 million in Q4, beating expectations. Reasons include strong earnings and disciplined capital expenditure management.
CooperVision Revenue $710 million, up 4.9% or 3.2% organically. Growth was driven by improved availability of MyDay lenses, offset by market softness in China and EMEA.
CooperSurgical Revenue $356 million, up 4% or 3.9% organically. Growth was driven by solid execution, market share gains in EMEA, and strong global genomics performance.
Gross Margin Declined marginally to 66.2%, driven by tariffs and product mix, partially offset by positive foreign exchange.
Interest Expense $23.7 million, with an effective tax rate of 14.2%. No specific reasons for change were mentioned.
Net Debt $2.4 billion, improving the bank-defined leverage ratio to 1.76x. Reasons include strong free cash flow and disciplined financial management.
PARAGARD Sales Grew 16%, driven by strong demand for the single-hand inserter upgrade launched earlier this year.
MiSight Revenue Grew 37%, driven by robust performance in the Americas and EMEA, supported by back-to-school campaigns and new pricing models.
MyDay premium daily silicone hydrogel lens portfolio: Accelerated global rollout with momentum building. Upcoming product launches expected to strengthen positioning and drive revenue growth in fiscal 2026.
MiSight: Delivered 37% growth, driven by strong performance in the Americas and EMEA. Upcoming launches in Japan and Europe expected to sustain growth.
clariti: Repositioning in Asia Pac showing early positive signs. New 3 Add multifocal launch delivered double-digit growth in the Americas.
PARAGARD: Grew 16% due to strong demand for single-hand inserter upgrade.
Global contact lens market: Trending towards premium offerings, benefiting MyDay portfolio. Market softness noted in China and certain EMEA regions.
Fertility market: Consumer spending remains tight, especially in Asia Pac. Positive signs include improving cycle activity in the U.S. and growing global clinic interest in new technology.
Reorganization and integration: Completed significant reorganization and integration work, unlocking $50 million in annual pretax savings starting fiscal 2026.
Free cash flow: Delivered $150 million in Q4, exceeding expectations. Fiscal 2026-2028 target raised to over $2.2 billion.
Share repurchase plan: Repurchased nearly $200 million in Q4, with a total fiscal year repurchase of $300 million. Plan increased to $2 billion.
Strategic review: Initiated formal strategic review to explore opportunities for long-term shareholder value.
Market softness in China and EMEA: The company experienced market softness in China and certain areas in EMEA, which impacted revenue growth. In China, there was a 28% decline driven by continued weakness in low-margin e-commerce channels.
Tariffs and product mix: Gross margins declined marginally due to tariffs and unfavorable product mix, which could continue to pressure profitability.
Consumer spending in fertility market: Consumer spending remains tight in the fertility market, especially in Asia Pacific, and clinics are managing spending carefully, which could impact growth in this segment.
Legacy product softness: There was softness in legacy products within the medical devices segment, which could hinder growth in this area.
Interest expense and Fed policy: Interest expense is expected to remain high at $85 million for fiscal 2026, with potential sensitivity to changes in Federal Reserve policy.
Reorganization and integration costs: The company incurred $89 million in charges related to reorganization and integration activities, which could temporarily impact financial performance.
Competitive pricing in low-margin channels: The company is not chasing aggressive pricing activity in low-margin e-commerce channels in China, which could limit market share in this region.
Revenue Expectations: For fiscal 2026, consolidated revenues are projected to be $4.3 billion to $4.34 billion, reflecting 4.5% to 5.5% organic growth. CooperVision's revenue is expected to be $2.9 billion to $2.925 billion, up 4.5% to 5.5% organically. CooperSurgical's revenue is expected to be $1.4 billion to $1.413 billion, up 4% to 5% organically.
Earnings Projections: Non-GAAP EPS for fiscal 2026 is projected to be $4.45 to $4.60, with strong operating margin improvement driven by operating expense leverage, offset by lower gross margins due to tariffs and mix.
Free Cash Flow: Free cash flow for fiscal 2026 is expected to improve to $575 million to $625 million, driven by stronger operating cash flow from higher profits, working capital improvements, and lower one-time costs. From fiscal 2026 through 2028, the company expects to generate over $2.2 billion in free cash flow.
Capital Expenditures: CapEx is expected to decline on an absolute basis as CooperVision's investment cycle winds down. CapEx will normalize in fiscal 2027 to roughly 5% of revenues, covering both maintenance and growth investments.
Market Trends and Product Launches: The global contact lens market is trending toward premium offerings, benefiting the MyDay portfolio. Upcoming launches include MyDay, MiSight, and MyDay toric multifocal in 2026. MiSight is expected to grow 20% to 25% in fiscal 2026, with further strength in 2027 as product launches gain traction. The fertility market shows early positive signs, including improving cycle activity in the U.S. and growing global clinic interest in new technology.
Operational Changes: The company completed significant reorganization and integration work, unlocking annual pretax savings of roughly $50 million starting in fiscal 2026. These savings will support investments, stock repurchases, and debt reduction.
Share Repurchase in Q4 2025: Repurchased nearly $200 million of stock in fiscal Q4, bringing total fiscal year repurchases to almost $300 million, which is roughly 2/3 of the 2025 free cash flow.
Share Repurchase Plan for Fiscal 2026: Expect to allocate a similar percentage of free cash flow to share repurchases as in 2025, with the remaining portion targeted to debt paydown.
Board Authorization for Share Repurchase: Board authorized an increase in the share repurchase plan to $2 billion in September 2025.
The earnings call indicates positive sentiment with strong product development, optimistic revenue guidance, and expected market share gains. The strategic plans for MyDAY and MiSight, along with anticipated operating margin expansion and free cash flow improvements, contribute to this outlook. Despite some gross margin pressure, the overall sentiment from the call, including analyst reactions, suggests a positive impact on stock price.
The earnings call presents a mixed outlook. Basic financial performance and product development are positive, but the Q&A reveals concerns over market share loss in Asia, unclear management responses, and margin pressures. The raised EPS guidance and strong MySight growth are positives, but aggressive pricing and Clariti challenges pose risks. Overall, the sentiment is neutral, with a balanced mix of positive and negative factors.
The earnings call reveals strong financial performance with a 6% revenue growth and a 14% EPS increase. The company maintains solid guidance and operational efficiency despite currency and tariff challenges. Share repurchases and a raised EPS guidance further indicate confidence. Although there are concerns in fertility and vision care markets, growth in myopia management and private label strategies remain robust. The Q&A section highlights management's optimism, especially with MiSight's growth, supporting a positive sentiment. Given the lack of market cap data, a moderate positive reaction (2% to 8%) is anticipated.
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