Why The Cooper Companies (COO) is a Convincing Buy Despite Recent Volatility

Investors often face the challenge of distinguishing between short-term market noise and long-term value creation. For Cooper Companies (COO), recent share price volatility-driven by strategic uncertainty and activist investor pressure-has obscured a compelling investment thesis rooted in strategic momentum, earnings resilience, and disciplined capital allocation. A closer examination of the company's 2025 performance and strategic initiatives reveals a business poised for sustained growth and shareholder value enhancement.

Strategic Momentum: Reimagining the Business for Growth

Cooper Companies has embarked on a transformative strategic review, catalyzed by activist investor Jana Partners, which advocates for unlocking value through potential divestitures or partnerships for its CooperVision and CooperSurgical units. This review is not merely defensive but a proactive effort to sharpen focus on core markets. For instance, CooperVision's acquisition of a U.S.-based contact lens company and CooperSurgical's purchase of obp Surgical and a fertility-focused firm underscore the company's commitment to expanding its product portfolios and geographic reach. These moves align with robust demand trends, particularly in contact lenses, which are projected to drive revenue growth in 2026.

The financials reinforce this momentum: Cooper reported $4.1 billion in revenue for fiscal 2025, with updated guidance projecting $4.30–$4.34 billion in 2026. This trajectory reflects confidence in market share gains and operational efficiency improvements, including a reorganization that leverages AI and IT investments to reduce back-office costs. Such strategic clarity positions Cooper to navigate competitive pressures while capitalizing on high-growth opportunities.

Earnings Resilience: Outperforming in a Challenging Landscape

Despite macroeconomic headwinds, Cooper Companies demonstrated remarkable earnings resilience in 2025. Non-GAAP diluted earnings per share (EPS) rose 12% year-over-year to $4.13, while the fourth-quarter EPS of $1.15 exceeded analyst forecasts by 3.6%. This outperformance is underpinned by operational discipline: the aforementioned reorganization is expected to generate $50 million in annual pre-tax savings by 2026, directly boosting margins.

The company's ability to balance cost-cutting with innovation is critical. For example, CooperSurgical's expansion into fertility solutions-a market with strong secular growth-complements its core surgical products, diversifying revenue streams. Meanwhile, CooperVision's dominance in contact lenses, a category with recurring revenue potential, provides a stable base. These dual drivers of growth and efficiency create a buffer against sector-specific volatility.

Disciplined Capital Allocation: Prioritizing Shareholder Value

Cooper Companies has consistently prioritized capital allocation strategies that maximize long-term value. In 2025, the firm returned $290.1 million to shareholders through share repurchases, including $197.3 million in the fourth quarter alone. This aggressive buyback program was further bolstered by a $1 billion expansion of the repurchase authorization, signaling management's confidence in free cash flow generation.

While the company discontinued its semi-annual dividend in 2023, it has redirected capital toward debt reduction and strategic investments. For fiscal 2026–2028, Cooper projects over $2.2 billion in free cash flow, with a portion earmarked for deleveraging. This approach prioritizes financial flexibility, ensuring the company can fund innovation or pursue accretive acquisitions without overextending.

Conclusion: A Convincing Buy Amid Volatility

Recent share price fluctuations, partly fueled by activist investor activity, have created an attractive entry point for investors. However, the underlying fundamentals-strategic realignment, earnings resilience, and prudent capital management-paint a picture of a company in transition toward higher-value operations. Cooper Companies' focus on core markets, coupled with its ability to generate strong free cash flow and reinvest in growth, positions it to deliver outsized returns in the medium to long term. For those willing to look beyond short-term noise, COO represents a compelling opportunity.