EUR 850.00 For Business Accounts Only

Morningstar | Cooper's Product Portfolio Supports a Narrow Moat

As a cash-pay business with sticky customers and few competitors, the contact lens industry is an attractive market, in our opinion. The four largest players (Johnson & Johnson, Novartis, Cooper, and Valeant) control approximately 96% of the global market, and industry regulation creates strong barriers to entry, keeping new entrants away. Cooper remains the only pure-play contact lens manufacturer. It fell behind its peers in the early 2000s as competitors brought silicone hydrogel lenses to market, but it has now launched a full portfolio of these lenses and has regained lost share, largely to the detriment of Novartis’ Alcon business and Valeant’s Bausch & Lomb business.We think Cooper's long-term outlook is relatively healthy even though there's some concern about increasing competition in the specialty lens market. With the benefit of higher-priced product offerings, such as silicone hydrogel and one-day premium lenses, we expect Cooper to expand margins and maintain double-digit earnings growth. We believe Cooper’s lens sales growth will be driven by two key factors. First, we see an increased adoption of contact lenses worldwide, largely in emerging markets. The unprecedented rise in myopia, particularly in the underpenetrated Asian market, presents long-term growth opportunities above historical adoption rates. Second, we believe existing customers will trade up to premium products as daily disposable lenses are growing in popularity across the globe. Daily lenses are more convenient for customers and reduce risk of infection, and silicone hydrogel lenses provide more comfort for lens wearers compared with traditional hydrogel lenses. CooperVision's expanded portfolio is well-positioned to benefit from both of these key drivers.While we don't consider it a moatworthy business, Cooper's surgical segment contributes about one fourth of total revenue after the acquisition of Paragard, a nonhormonal copper IUD. We expect that Cooper will continue investing in its surgical segment with increased sales efforts for Paragard, as well as tuck-in acquisitions.