Avanos Medical, Inc. ( AVNS Quick Quote AVNS - Free Report) is well poised for growth on the back of robust performances by its Chronic Care and Pain Management segments as well as a strong product portfolio. However, competition remains stiff.
Avanos Medical with a market capitalization of $2.18 billion is a medical technology company that offers infection prevention, surgical, respiratory, digestive health and pain management solutions. It anticipates an earnings improvement of 6.3% over the next five years. Moreover, it has a trailing four-quarter earnings surprise of 83.5%, on average.
In the past six months, the stock has gained 38.2% compared with 5.5% growth of its
Let’s take a closer look at the factors that substantiate the company’s currently Zacks Rank #3 (Hold) status.
Factors Working in Favor Segmental Strength: Avanos reports through two broad segments, namely Chronic Care and Pain Management. In the fourth quarter of 2020, net revenues at the Chronic Care segment inched up 2.3% year over year while the Pain Management segment witnessed a sequential improvement.
Pain Management focuses on non-opioid solutions like acute pain products, such as On-Q surgical pain pumps compression therapy systems. The company plans to continue developing clinical evidence to further enhance the reimbursement for COOLIEF. For ON-Q, the company is utilizing its relationships with sellers to promote therapy adoption and expedite sales.
Moreover, in spite of overall lower sales due to the pandemic, the company registered significant double-digit sales growth of ON-Q through customers using the pre-fill option of Leiters. At the end of 2020, the company inked several deals with medical distribution and servicing organizations to promote ON-Q.
Product Portfolio: Avanos boasts a broad product spectrum, which is a significant contributor to its top line. Notably, the company offers an innovative portfolio focused on respiratory and digestive health along with surgical and interventional pain management to improve patient outcome and reduce the cost of care.
In the fourth quarter, within the Chronic Care segment, the company saw continued solid demand for its Respiratory Health products, driven by closed suction catheters and oral care products, which are used to treat COVID-19 patients. Within its Digestive Health franchise, the company launched its CORTRAK standard-of-care sales strategy, which led to double-digit growth across the CORPAK portfolio. Also, its NeoMed portfolio generated double-digit growth. While the postponement of elective procedures having affected growth in the company’s Pain Management franchise, it boosted the long-term growth potential of this franchise through a range of selling and marketing initiatives implemented during the initial stages of the pandemic.
What’s Holding the Stock Back?
Avanos faces significant competition in the U.S. and international markets, which continues weighing on its margins.
For the first quarter of 2021, the Zacks Consensus Estimate for revenues is pegged at $176.6 million, indicating a decline of 2.1% from the prior-year quarter’s reported figure. The same for earnings stands at 18 cents per share, suggesting a rise of 12.5% from the year-ago comparable period’s reported number.
Stocks to Consider
Some better-ranked stocks from the broader medical space are
Align Technology ( ALGN Quick Quote ALGN - Free Report) , Abbott Laboratories ( ABT Quick Quote ABT - Free Report) and Hologic ( HOLX Quick Quote HOLX - Free Report) . While Align Technology currently sports a Zacks Rank #1 (Strong Buy), the other two are presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Align Technology has a projected long-term earnings growth rate of 19%.
Abbott has a projected long-term earnings growth rate of 14.1%.
Hologic has an estimated long-term earnings growth rate of 15.4%.
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