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A Closer Look At Cooper

TURNAROUND EFFORTS and a search for a new chief at Cooper (COO), whose CooperVision arm makes contact lenses, have Wall Street in a wait-and-see stance. Six of the nine analysts who track the stock rate it "hold," one says "sell," but two say "buy." The worry is that things may get worse. But some pros are stocking up: They believe Cooper's recovery plan is working, and they see a possible buyout. "The Street is skeptical, but in fact Cooper is doing better and attracting the [attention of] bigger companies," says Lewis Rabinowitz of C.E. Unterberg, Towbin, which owns shares. Mark Kronenfeld, managing director at hedge fund Richmark Capital, which also owns shares, says Cooper's franchise is well established, and the stock, at 49.58, is very cheap. Its price-earnings ratio of 16 is below its peers' 25 to 26. Cooper deserves a p-e of 20 to 21, figures Kronenfeld, implying a price of 60 to 65, based on his 2008 profit forecast of $3.10 a share. Kronenfeld says Cooper would be a good strategic fit for Alcon (ACL), an eye-care company 75%-owned by Nestl? (NSRGY). Alcon had 2006 sales of $4.9 billion and a market cap of nearly $5 billion, vs. Cooper's $860 million and $2.2 billion, respectively. Lawrence Keusch of Goldman Sachs (GS), who rates it a buy, says Cooper is "poised for a rebound" as it ramps up output of its new one-month disposable Biofinity lenses. And he views an upcoming management change as "positive." CEO Thomas Bender steps down at yearend 2007. Chief Operating Officer Robert Weiss will act as CEO until a permanent chief is named. Keusch sees 2008 earnings jumping 21% from his estimated 2007 earnings of $2.62. Both Cooper and Alcon declined comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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