The long-term outlook for eyesight is not good. Teenagers around the world are spending so much time on screens that nearsightedness is spreading fast. By some estimates, half the world will be myopic by 2050.
That's one reason the outlook for Cooper Cos. is so good. Based in San Ramon, Calif., Cooper is the No. 2 maker of contact lenses, with nearly 30% of the global market, trailing only Johnson & Johnson, the maker of Acuvue. Cooper has a promising product just for teens, and plenty else for other age groups.
More immediately, Cooper's stock could get a lift from some corporate developments. The company may soon unveil a sale of its surgical business , creating a pure-play contact-lens company that itself could become a takeover target. Then there are the two activist investment firms with stakes in Cooper, Jana Partners and Browning West. They have been putting heat on the company and already have had some success.
Cooper got a new chairman and another new board member in December -- something sought by Browning West in a public letter last November. The West Coast firm argued that changes were needed because Cooper's execution and profit growth flagged in recent years.
Cooper stock, at around $74, is down about 8% this year but up 25% from a May low of around $60. The activists got involved in part because the stock has performed poorly over the past five years after peaking at $115 in 2021.
The shares trade for a reasonable 16 times projected earnings of $4.63 for the company's fiscal year, ending in October. That's a discount to peers Alcon and Bausch + Lomb, the two other companies in the contact-lens oligopoly. Cooper has a market value of more than $14 billion. Earnings are expected to climb 12% in the current fiscal year.
"Cooper is a special situation with an activist campaign going on and a management team that says it will disentangle" the company, says Anthony Petrone, a Mizuho Securities analyst with an Outperform rating and an $85 price target.
"Cooper has an impressive track record of contact lens market share gains, which we attribute to its leading position in specialty lenses and its unique private-label strategy," wrote Oakmark Global manager David Herro in his second-quarter letter.
Cooper's main division is contact lenses, which accounts for about two thirds of its $4.3 billion in annual sales and an even higher share of earnings. It's an attractive industry, with 4% to 6% annual sales growth, high barriers to entry, and sticky customers -- you need a doctor's prescription to get lenses or change brands.
The industry has been helped by increased adoption of one-day silicone hydrogel lenses. These are safer than two-week and monthly lenses that require daily cleaning and can lead to eye infections. The dailies are also more expensive -- often $2 a day for both eyes -- and more profitable for manufacturers.
Cooper also has benefited from the growth of toric lenses, used by those with an astigmatism, and multifocal lenses, for older people who need help with both distance and reading. These two lenses account for half of Cooper's lens sales of about $3 billion annually. The company has gained market share in lenses for 18 straight years ending in 2025.
Cooper is also the leader in lenses for children. It has a product called MiSight that mitigates the progression of nearsightedness that usually occurs from about age 10 to 18. Sales are still small, about $125 million on an annualized basis, but the potential is big.
Kids' heavy screen time is stretching the inside of their eyes, which in turn can cause nearsightedness. In Asia, this is reaching epidemic proportions. MiSight could help ease the problem and support sales for years to come.
The company's surgical business, accounting for about a third of sales, is geared toward fertility and women's health. Cooper began a strategic review last December, and CEO Albert White said on the earnings conference call on June 4 that the company is "now actively advancing discussions with multiple parties that have submitted significant indications of interest in CooperSurgical."
It's a good bet that the surgical business gets sold. An announcement could come as soon as Sept. 9, when the company reports July-quarter earnings. Cooper didn't respond to a request for comment.
Despite weakness in medical-device stocks this year and lower industry price/earnings ratios, there is strong interest from private equity in the surgical and fertility sectors.
Cooper's surgical business could fetch $4 billion or more. White said on the June call that a "majority" of the proceeds from a potential sale would go to stock buybacks. That could mean large repurchases relative to Cooper's $14.5 billion market value.
If the surgical business is sold, Cooper would become the only big pure-play contact lens manufacturer. That could attract takeover interest from the likes of EssilorLuxottica, a $90 billion market value eye-care giant that is the leading maker of eyeglass frames. Another potential buyer is Hoya, a Japanese company with a large vision business.
Some drawbacks: Sales growth in contact lens business is slowing somewhat, with Cooper cutting organic sales-growth guidance for the current year to about 4% from 5% in June. Contact-lens rivals have made some inroads against Cooper in recent years. Also, Cooper doesn't pay a dividend. That's probably a mistake since investors in healthcare stocks like them.
But there's still plenty of reason for optimism. Jeff Johnson, a bullish Baird analyst, sees $1 billion of free cash flow in its 2027 fiscal year, up from $650 million in the current year. As the Cooper story comes into greater focus, investors should like what they see.
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