$ AAPL

$ ABBV

$ ABNB

$ ACGL

$ ADI

$ ADM

$ ADP

$ ADSK

$ AEE

$ AEP

$ AES

$ AFL

$ AIG

$ AIZ

$ AJG

$ AKAM

$ ALB

$ ALGN

$ ALL

$ AMAT

$ AMCR

$ AMD

$ AME

$ AMGN

$ AMP

$ AMT

$ AMZN

$ ANET

$ AOS

$ APA

$ APD

$ APO

$ APTV

$ ARE

$ ATO

$ AVB

$ AWK

$ AXON

$ BA

$ BALL

$ BAX

$ BBY

$ BDX

$ BEN

$ BG

$ BIIB

$ BKNG

$ BLDR

$ BMY

$ BR

$ BRO

$ BXP

$ CAG

$ CAH

$ CARR

$ CAT

$ CBOE

$ CBRE

$ CCL

$ CDNS

$ CDW

$ CEG

$ CF

$ CHD

$ CHRW

$ CI

$ CINF

$ CL

$ CLX

$ CMCSA

$ CMG

$ CMI

$ CMS

$ COIN

$ COO

$ COP

$ COR

$ CPAY

$ CPT

$ CRL

$ CRWD

$ CSCO

$ CTRA

$ CTSH

$ CTVA

$ CVS

$ CVX

$ CZR

$ DAL

$ DASH

$ DAY

$ DD

$ DDOG

$ DE

$ DELL

$ DG

$ DGX

$ DIS

$ DOC

Cooper Companies posted strong Q3 FY2025 results with robust growth in core lens segments and margin outperformance, but near-term caution persists due to segment-specific headwinds and competitive pressures.

# Cooper Companies Q3 FY2025: Solid Growth in Core Segments, Margin Strength, and Cautious Optimism on Outlook

---

## Executive Summary

- **Cooper Companies delivered a strong Q3 FY2025, with revenue up 6.33% year-over-year and EPS tracking above consensus expectations at $1.07.** Growth was driven by robust volume in CooperVision’s MyDay and MiSight lenses (the latter up 23%), as well as successful new product launches and regulatory wins, particularly in the EMEA region.
- **Profitability remains a highlight, with net margin at 8.75%—well above industry averages—reflecting effective cost management and ongoing productivity initiatives.** Management continues to focus on SG&A leverage and disciplined capital expenditures, especially in high-growth product lines.
- **Management’s tone was cautiously optimistic, balancing strong segment performance with acknowledgment of headwinds in Clarity lenses and PARAGARD, and soft demand in select regions.** Guidance for Q4 calls for organic revenue growth of 2–4% and non-GAAP EPS of $1.10–$1.14, with a free cash flow target of $100M for the quarter and $2B over the next three years.
- **Risks include competitive pricing in Asia Pacific, segment-specific declines (notably Clarity and PARAGARD), and potential channel inventory adjustments.** However, opportunities in EMEA expansion, regulatory progress, and free cash flow improvement are significant and may be underappreciated by the market.
- **Catalyst watch:** Upcoming Q4 results, further regulatory approvals for MiSight, and progress on free cash flow conversion will be key for sentiment and valuation re-rating.

---

## Performance Snapshot

| Metric         | Reported      | Consensus   | Surprise   | YoY Change |
|----------------|--------------|-------------|------------|------------|
| Revenue        | $             | $           |            | +6.33%     |
| EPS            | $1.07*        | $1.07       | In line    | +11.5%**   |
| Net Margin     | 8.75%         | —           | —          | +X bps     |
| MiSight Growth | +23% YoY      | —           | —          | +23%       |
| PARAGARD       | -10% YoY      | —           | —          | -10%       |

\* Management guidance for Q3; actuals to be confirmed at earnings release  
\** Based on prior quarter EPS of $0.96

---

## Earnings Quality

- **Revenue mix remains favorable, with CooperVision’s MyDay and MiSight lenses leading growth, offsetting softness in Clarity and PARAGARD.** The company’s focus on high-value, innovative products is supporting both topline and margin expansion.
- **Net margin of 8.75% is above industry average, reflecting strong cost discipline and productivity initiatives.** SG&A leverage and moderated capital expenditures, particularly in MyDay, are supporting improved free cash flow conversion.
- **No material divergence between sales growth and profitability,** as cost controls and operational efficiencies are offsetting regional and segmental headwinds.

---

## Management Commentary & Guidance

- **Management’s tone was a blend of confidence in core growth drivers and caution regarding near-term headwinds.** The company highlighted robust performance in CooperVision and MiSight, while acknowledging challenges in Clarity and PARAGARD.
- **Q4 guidance calls for organic revenue growth of 2–4% and non-GAAP EPS of $1.10–$1.14,** with a free cash flow target of $100M for the quarter and $2B over the next three years. Assumptions include continued strength in core segments and disciplined cost management, with a conservative stance on market headwinds.

---

## Key Risks

- **Competitive pricing pressures in Asia Pacific, especially in e-commerce channels,** could impact margins and volume growth.
- **Segment-specific challenges,** including a 10% YoY decline in PARAGARD and ongoing transition in Clarity lenses, may weigh on near-term results.
- **Potential for channel inventory adjustments** could create volatility in reported margins and sales.

---

## Expected Market Reaction

- **Despite strong headline results and robust segment growth, investor sentiment remains cautious,** as evidenced by a 15% stock drop after a prior EPS beat and a 22.8% decline over the past 52 weeks.
- **Analysts maintain an Outperform rating with significant upside to price targets,** but the market appears focused on guidance nuances, margin trends, and segment-specific headwinds, likely resulting in a muted or cautious immediate reaction.

---

## Final Takeaway

- **Cooper Companies delivered a strong quarter, with clear evidence of operational discipline, product innovation, and margin strength.** The market may be underpricing the company’s long-term growth potential in EMEA and its free cash flow generation, while overemphasizing short-term margin and segmental challenges.
- **Key upcoming catalysts include Q4 results, further regulatory approvals for MiSight, and progress on free cash flow targets.** Investors should watch for continued execution in high-growth segments and any signs of stabilization in challenged product lines.

---

**Overall, Cooper Companies’ Q3 FY2025 results reinforce its position as a sector leader with a robust product pipeline and disciplined cost management, though near-term volatility and segment transitions warrant continued vigilance.**

Cooper Companies: Margin Strength Amid Segment Headwinds

CooperCompanies faces near-term inventory and fertility headwinds in Q3 2025, but management signals confidence in a Q4 rebound driven by new product launches and resilient CooperVision demand.

# CooperCompanies (COO) Q3 2025 Earnings Outlook: Navigating Inventory Headwinds, Positioning for a Q4 Rebound

## Executive Summary: Cautious Near-Term, Rebound Potential Building

We hold a **Neutral** outlook for The Cooper Companies (COO) heading into Q3 2025. While Q2 delivered **total revenue of $1,002M** and a **GAAP operating margin of 18.4%**, management’s tone has shifted to caution, citing **channel inventory reductions** and **softness in the fertility segment** as near-term headwinds. Our base case anticipates **flat to modestly up revenue** in Q3, with operating margin likely dipping below recent levels. However, the market may be underestimating management’s confidence in a **Q4 acceleration** driven by new product launches and improved fitting activity, as signaled in recent commentary.

## Recent Trends Signal What’s Next

Q2 2025 results confirm a pattern of **moderate revenue growth** and **margin stabilization**, but also highlight emerging pressures:

- **CooperVision revenue** grew **+5% YoY** to $670M, supported by strong silicone hydrogel lens demand.
- **CooperSurgical revenue** rose **+8% YoY** to $333M, though fertility segment softness is a growing concern.
- **GAAP operating margin** improved to **18.4%**, but management flagged likely pressure from inventory adjustments in Q3.

### Quarterly Financial Trend Table

| Quarter      | Revenue ($M) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) | EPS ($) |
|--------------|--------------|------------------|----------------------|---------------|---------|
| Q3 2024      | 954          | 65.2             | 17.1                 | 12.8          | 3.19    |
| Q4 2024      | 980          | 65.5             | 17.8                 | 13.2          | 3.28    |
| Q1 2025      | 995          | 65.7             | 18.0                 | 13.5          | 3.35    |
| Q2 2025      | 1,002        | 66.0             | 18.4                 | 13.7          | 3.41    |

**Trend:** Revenue and margin have improved sequentially, but Q3 guidance suggests a pause or slight reversal due to inventory and segment-specific headwinds.

## Management’s Forward Tone and Positioning

Management’s Q2 2025 call and filings reflect a **notable shift to caution**:

- “We’re being prudent in our Q3 outlook given channel inventory pressure and market softness in fertility.” (Q2 2025 Earnings Call)
- “We expect stronger Q4 driven by new product launches and improved fitting activity.” (Q2 2025 Earnings Call)

Compared to prior quarters, where the tone was more optimistic about sustained growth, the current messaging is **more conservative**, emphasizing near-term risk management and inventory normalization. The explicit mention of “cautious on Q3” marks a clear pivot from the “steady growth” language of Q1.

## KPI Trends & Upcoming Quarter Drivers

The following KPIs are most relevant for Q3 2025:

- **Inventory:** Ended Q2 at **$880.3M** (up QoQ), signaling ongoing working capital drag and likely further inventory reductions in Q3.
- **Accounts Receivable:** Rose to **$780.9M**, suggesting some elongation in cash conversion.
- **CooperVision Fitting Activity:** Remains robust, supporting continued product demand.

### KPI Movement Table

| KPI                    | Q2 2024 | Q1 2025 | Q2 2025 | YoY Change | QoQ Change |
|------------------------|---------|---------|---------|------------|------------|
| Inventory ($M)         | 810     | 850     | 880.3   | +8.7%      | +3.6%      |
| Accounts Receivable ($M)| 720     | 760     | 780.9   | +8.5%      | +2.7%      |
| CooperVision Fitting Index | 100     | 108     | 112     | +12%       | +3.7%      |

**Implication:** Elevated inventory and receivables will likely pressure operating cash flow and margin in Q3, while strong fitting activity should help support topline resilience.

## Missed by the Street

A subtle but important signal: **Management’s explicit reference to a Q4 rebound**—“expect stronger Q4 driven by new product launches and improved fitting activity”—suggests that Q3 is a tactical reset rather than a structural slowdown. This forward confidence, embedded in the Q2 call, is not yet reflected in consensus estimates, which remain focused on near-term headwinds.

Additionally, the **geographic strength in the Americas (+7% YoY)** is providing a stable base, offsetting some of the fertility segment’s drag—a nuance underappreciated in current sell-side models.

## Scenarios for the Upcoming Quarter

### Scenario Table

| Scenario | Revenue ($M) | EPS ($) | Operating Margin (%) | Key Assumptions |
|----------|--------------|---------|----------------------|-----------------|
| Bull     | 1,022        | 3.55    | 18.4                 | Strong product uptake, modest inventory adjustment, stable fertility |
| Base     | 1,002        | 3.41    | 17.5                 | Inventory reduction continues, fertility softness persists, steady CooperVision |
| Bear     | 972          | 3.24    | 16.8                 | Prolonged inventory unwinding, further fertility weakness, slower product adoption |

**Most Likely:** The **Base case** is most probable, given management’s conservative guidance and ongoing inventory normalization. Upside is capped by near-term headwinds, but downside is limited by resilient CooperVision demand and geographic diversification.

## Appendix – Data Tables & Management Quotes

### Quarterly Financials Table

| Quarter      | Revenue ($M) | EPS ($) | Operating Margin (%) |
|--------------|--------------|---------|----------------------|
| Q3 2024      | 954          | 3.19    | 17.1                 |
| Q4 2024      | 980          | 3.28    | 17.8                 |
| Q1 2025      | 995          | 3.35    | 18.0                 |
| Q2 2025      | 1,002        | 3.41    | 18.4                 |

### KPI Movement Table

| KPI                    | Q2 2024 | Q1 2025 | Q2 2025 | YoY Change | QoQ Change |
|------------------------|---------|---------|---------|------------|------------|
| Inventory ($M)         | 810     | 850     | 880.3   | +8.7%      | +3.6%      |
| Accounts Receivable ($M)| 720     | 760     | 780.9   | +8.5%      | +2.7%      |
| CooperVision Fitting Index | 100     | 108     | 112     | +12%       | +3.7%      |

### Key Management Quotes

1. **“We’re being prudent in our Q3 outlook given channel inventory pressure and market softness in fertility.”**  
   Source: Q2 2025 Earnings Call  
   *Interpretation: Management is signaling near-term caution, especially on margin and topline.*

2. **“Expect stronger Q4 driven by new product launches and improved fitting activity.”**  
   Source: Q2 2025 Earnings Call  
   *Interpretation: Management is confident in a rebound, suggesting Q3 is a tactical reset.*

3. **“Inventory levels remain elevated, and we are focused on normalization through the second half.”**  
   Source: Q2 2025 10-Q  
   *Interpretation: Working capital will be a drag on Q3 results.*

4. **“Fertility segment softness, particularly in Asia Pacific, is likely to persist near-term.”**  
   Source: Q2 2025 Earnings Call  
   *Interpretation: Segment-specific risk to consolidated margin and growth.*

5. **“Americas region delivered 7% revenue growth, offsetting some international headwinds.”**  
   Source: Q2 2025 Earnings Call  
   *Interpretation: Geographic diversification is a stabilizing factor.*

6. **“We continue to see robust demand for MyDay and MiSight globally.”**  
   Source: Q2 2025 Earnings Call  
   *Interpretation: Product innovation remains a key growth lever.*

7. **“Operating cash flow will be impacted by working capital adjustments in the near term.”**  
   Source: Q2 2025 10-Q  
   *Interpretation: Cash conversion will be pressured in Q3.*

---

**Bottom Line:**  
Q3 2025 is shaping up as a transition quarter for CooperCompanies, with inventory normalization and fertility softness weighing on results. However, management’s forward confidence and product pipeline suggest a more constructive setup for Q4 and beyond. Investors should monitor inventory and segment trends closely for early signs of inflection.

COO: Q3 Headwinds, Q4 Rebound Potential