Its biggest rival is probably Johnson and Johnson, and it reported only 1.6% constant currency growth for its vision care range; thanks to currency effects its international vision care was down 4.4%.
It was a similar story with Novartis AG (ADR) (NYSE:NVS)’ Alcon unit. Ophthalmic pharmaceuticals sales were up 5%, but vision care was only up 3% and, in line with what Johnson & Johnson (NYSE:JNJ) and Cooper said, its surgical revenues were soft with only 2% growth being recorded. Alcon is not a huge part of Novartis AG (ADR) (NYSE:NVS)’ revenues, but it is of strategic important to the company and complements its generic and OTC pharmaceuticals activities.
However, the big news in the industry in the quarter was Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’ agreement to purchase Bausch & Lomb for $8.7 billion. It is certainly a busy time for Valeant Pharmaceuticals Intl Inc (NYSE:VRX) as it attempts to integrate Medicis as well as prepare for Bausch & Lomb. Interestingly Valeant Pharmaceuticals Intl Inc (NYSE:VRX) disclosed that Bausch & Lomb grew revenues at 9% last year (although this includes its surgical segment). Valeant Pharmaceuticals Intl Inc (NYSE:VRX) talked about generating $800 million in cost synergies by the end of 2014, but this does not mean it won’t be investing in eye-care. In fact Bausch & Lomb’s strength in emerging markets is complimentary to Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s North American focus, and eye-care, dermatology and aesthetics are good bed-fellows in terms of strategic development. We can expect increased competition as a result of this deal.
I would summarize the industry background as being stable but slightly weaker than might have been expected.
Where next for Cooper Companies?
In conclusion Cooper Companies is a very attractive company that can achieve good revenue and margin growth even if the economy slows. In my opinion its evaluation should command a premium over the market but, as ever, the question is how much do you want to price in? The ‘defensive’ sector has certainly led the market this year, and many stocks within it (particularly food stocks) are starting to look toppy to me.
As I write this, Cooper Companies trades on $120 and an enterprise value (EV) of $5.85 billion. Interpolating from my table above, this puts it on a forward PE ratio of 19.3x and a forward FCF/EV yield of only 3.1%. As much as I like the stock I am still going to truculently go away, sit in a corner and mumble that it’s too expensive right now while patiently waiting for a dip.
Lee Samaha has a position in Johnson & Johnson. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Lee is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Tme to Buy This Defensive Growth Stock? originally appeared on Fool.com is written by Lee Samaha.
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