CooperCompanies (COO) shareholders faced a double blow on Wednesday as the medical-device maker announced it would retain its CooperSurgical unit following a strategic review, while simultaneously lowering its fiscal 2026 sales and earnings outlook. The company also cautioned that a deliberate reduction in U.S. contact-lens inventory would continue to pressure fourth-quarter results.
In after-hours trading, COO shares plummeted 15.9% to $53.40, following a 6.2% decline in the regular session to $63.48. Combined, the stock was roughly 21% below Tuesday's close of $67.69, erasing billions in market value and disappointing investors who had hoped for a breakup catalyst.
No Sale of CooperSurgical
CooperCompanies initiated a strategic review in December 2025, exploring portfolio, capital allocation, and structural alternatives. The board considered a sale of CooperSurgical and engaged with multiple parties, but ultimately concluded that the offers did not reflect the unit's true value. According to the company's SEC filing, two temporary issues dampened bidder interest: a new competitor in the non-hormonal intrauterine device market and the impact of a fertility litigation settlement.
While management left the door open for future alternatives, investors who had priced in a near-term separation now face the challenge of valuing the combined businesses again. CooperSurgical itself performed reasonably in the quarter, with revenue up 2% to $349.2 million and organic growth of 3%, including a 5% organic increase in fertility revenue. This contrasts sharply with the struggles at CooperVision, making the retention decision strategically understandable, even if it removes an immediate catalyst.
Guidance Cut Driven by Contact Lenses
The company's fiscal third-quarter revenue rose just 1% to $1.066 billion, missing the consensus estimate of approximately $1.10 billion. Adjusted earnings per share increased 4% to $1.15, slightly beating expectations. However, GAAP EPS of $2.24 was inflated by a one-time $307.2 million tax benefit from a favorable U.K. tax examination.
Looking ahead, CooperCompanies reduced its full-year revenue guidance to $4.229 billion–$4.252 billion from a prior range of $4.285 billion–$4.321 billion, with the midpoint falling by about $62.5 million. Adjusted EPS guidance was trimmed to $4.51–$4.55 from $4.58–$4.66. Nearly all of the reduction came from CooperVision, whose full-year range dropped by roughly $55 million to $66 million at the low and high ends, respectively. CooperSurgical's outlook remained virtually unchanged.
CooperVision's quarterly revenue was flat at $717.0 million, with a 2% decline in the Americas. Management attributed the weakness to a proactive reduction in U.S. channel inventory, which they expect to persist into the fourth quarter. The company now projects fourth-quarter adjusted EPS of $1.05–$1.09, well below the consensus of around $1.20.
Buyback Provides Limited Support
Despite the operational challenges, CooperCompanies generated record free cash flow of $273.0 million, up 66% year-over-year. The company repurchased $339.1 million worth of shares during the quarter, buying 4.9 million shares at an average price of $69.16—about 30% above the after-hours price. The board also expanded the buyback authorization to $3 billion, leaving approximately $1.5 billion available.
At the current after-hours price, that remaining authorization represents roughly 28 million shares, or about 14% of the diluted share count. However, as analysts note, buybacks cannot compensate for a lower growth trajectory or replace the transaction premium investors had anticipated. The company's balance sheet, with $2.54 billion in debt and $154.7 million in cash, provides some flexibility, but repurchases exceeded free cash flow in the quarter by $66.1 million.
What Could Reverse the Selloff?
Investors will be watching closely to see whether CooperVision's inventory correction resolves by the end of the fourth quarter or spills into fiscal 2027. Evidence that the company's non-GAAP gross margin—down 60 basis points due to manufacturing costs and foreign exchange—can stabilize will also be crucial. For CooperSurgical, the focus shifts to operational execution: sustained fertility growth, expense leverage, and no further litigation setbacks. A future transaction at a better valuation could revive the separation thesis, but for now, that remains a possibility rather than a base case.
