Why Cooper Companies (COO) Is a Strong Buy Despite Near-Term Revenue Headwinds

Cooper Companies (COO) has long been a poster child for disciplined execution and strategic innovation in the medical devices and vision care sectors. While recent near-term revenue headwinds—stemming from product transition dynamics, inventory adjustments, and macroeconomic pressures—have tempered short-term optimism, the company's underlying fundamentals remain robust. For investors with a long-term horizon, COO's strong earnings growth, margin expansion, and momentum in premium product transitions position it as a high-conviction buy.

Earnings Growth and Margin Expansion: A Foundation for Resilience

Despite softness in certain segments, Cooper Companies delivered a 14% year-over-year increase in non-GAAP diluted EPS to $0.96 in Q2 2025, outpacing revenue growth. This outperformance was driven by margin discipline and cost optimization. The company's non-GAAP operating margin expanded to 25%, up from 24% in the prior year, while gross margins held steady at 68%. These improvements reflect operational efficiency gains and a shift toward higher-margin products like MyDay silicone hydrogel lenses and MiSight myopia management solutions.

Free cash flow generation further underscores COO's financial strength. The company generated $18.1 million in free cash flow in Q2 2025, with $96.2 million in operating cash flow and $78.1 million in capital expenditures. This cash flow flexibility has enabled strategic share repurchases—$40.6 million in Q2 alone—while maintaining a strong balance sheet with $215.8 million remaining under its buyback program.

Product Transition Momentum: A Catalyst for Long-Term Growth

The transition from lower-margin products like Clarity to premium offerings such as MyDay and MiSight is a strategic masterstroke. While Clarity sales declined in Asia-Pacific and the Americas, MyDay's daily silicone hydrogel portfolio grew double-digit in Q2 2025. This shift is not just a short-term fix but a structural move toward higher-value segments. For instance, MyDay Multifocal and Toric lenses grew by 20% and 10%, respectively, in Q3 2025, driven by demand for digital boost technology and multifunctional features.

The company's focus on myopia management is another growth lever. MiSight, designed to slow nearsightedness progression in children, achieved record performance in EMEA and is set for expansion into Europe and Asia-Pacific in 2026. This product line, which grew 23% in Q3 2025, taps into a $10 billion global market and positions COO as a leader in a high-margin, high-growth niche.

Strategic Acquisitions and Geographic Diversification

Cooper Companies' long-term strength lies in its ability to diversify revenue streams through strategic acquisitions and geographic expansion. The 2024 acquisition of obp Surgical and 2023 Cook Medical assets have bolstered CooperSurgical's portfolio with innovative products like single-use, cordless surgical retractors, which grew 23% in Q3 2025. These additions mitigate risks from softer areas like fertility markets and provide a buffer against macroeconomic volatility.

Geographically, EMEA has emerged as a bright spot. CooperVision's 14% year-over-year growth in the region, driven by MyDay and MiSight, contrasts with the 5% organic decline in Asia-Pacific. This regional diversification reduces reliance on any single market and creates a more stable revenue base.

Navigating Near-Term Headwinds with Confidence

The near-term challenges—Clarity's decline, e-commerce slowdowns in Asia-Pacific, and fertility market softness—are well-telegraphed and largely structural. For example, the shift to MyDay has caused temporary demand shifts, but this transition is a one-time hit with long-term gains. Similarly, inventory destocking in the Americas is a cyclical issue, not a structural one.

Management has already adjusted guidance to reflect these headwinds, with Q4 2025 organic growth projections of 2-4% for both CooperVision and CooperSurgical. However, these revisions are conservative and fail to fully account for the company's capacity to innovate and adapt. The resolution of MyDay manufacturing constraints, for instance, is expected to accelerate revenue growth in 2026.

Investment Thesis: A High-Conviction Buy

For long-term investors, COO's combination of margin resilience, product innovation, and strategic diversification makes it a compelling buy. The company's updated 2025 guidance—$4.107 billion to $4.146 billion in revenue, with non-GAAP EPS of $4.05 to $4.11—reflects confidence in its ability to navigate near-term challenges while maintaining a 25%+ operating margin.

Moreover, COO's disciplined capital allocation—$1 billion share repurchase program and $2 billion in projected free cash flow over three years—ensures that shareholder value remains a priority. With a P/E ratio of ~22x (based on 2025 guidance) and a forward PEG ratio of 1.2x, the stock appears undervalued relative to its growth prospects.

Conclusion

Cooper Companies is a textbook example of a business that is stronger for the long term despite short-term turbulence. The near-term revenue headwinds are manageable and temporary, while the company's premium product transitions, margin discipline, and strategic acquisitions create a durable competitive moat. For investors seeking a high-conviction buy in the medical devices and vision care sectors, COO offers a compelling opportunity to capitalize on its long-term growth trajectory.