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Avanos (AVNS) Q4 Earnings Surpass Estimates, Margins Up
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Avanos Medical, Inc. (AVNS - Free Report) reported fourth-quarter 2022 adjusted earnings per share (EPS) of 60 cents, up 20% year over year. The bottom line surpassed the Zacks Consensus Estimate by 25%.
Our projection of adjusted EPS was 47 cents.
GAAP EPS in the quarter under review was 36 cents, up 50% year over year.
Full-year adjusted EPS was $1.65, up 41% from the end of 2021. Our projection of full-year adjusted EPS was $1.52.
Revenues
Revenues grossed $217.5 million in the reported quarter, up 12.5% year over year. The metric exceeded the Zacks Consensus Estimate by 1.1%.
The fourth-quarter revenue compares to our estimate of $215 million.
In the fourth quarter, volume was driven by continued strong demand for Digestive Health products and improvements in Interventional Pain solutions. However, this was partially offset by a lower volume of Respiratory Health products compared to the pandemic-driven demand in the prior year and an expected lower volume of Acute Pain products due to fewer elective procedures.
At constant exchange rate (CER), net sales increased by 14%.
Full-year revenues were $820 million, reflecting a 10.1% improvement from the comparable 2021 period. At CER, net sales increased by 12%.
Our projection of full-year revenues was $817.5 million.
Q4 Segmental Analysis
Avanos provides a portfolio of innovative product offerings that focuses on Pain Management and Chronic Care.
Pain Management’s net revenues of $88.7 million increased 30.8% on a year-over-year basis. Excluding the OrthogenRx buyout and the negative impact of currency, the business recorded a year-over-year sales uptick of 2.6%. The business saw double-digit growth for Game Ready and COOLIEF products, partially offset by continued headwinds in On-Q.
This figure compares to our Pain Management segment’s fourth-quarter projection of $87.1 million.
Chronic Care’s net revenues of $128.8 million improved 2.5% year over year, owing to strength in Digestive Health. Excluding Maxter and the negative impact of currency, sales grew almost 6% year over year. The business saw continued execution for NeoMed and high single-digit demand for Avanos’ closed suction catheter products.
This figure compares to our Chronic Care segment’s fourth-quarter projection of $127.9 million.
Avanos Medical, Inc. Price, Consensus and EPS Surprise
In the quarter under review, Avanos’ gross profit rose 18.2% to $116.9 million. Gross margin expanded 261 basis points (bps) to 53.7%.
Selling and general expenses rose 9.8% to $82.6 million. Research and development expenses declined 1.3% year over year to $7.5 million. Adjusted operating expenses of $90.1 million increased 8.8% year over year.
Adjusted operating profit totaled $26.8 million, reflecting a 66.5% uptick from the prior-year quarter. The adjusted operating margin in the fourth quarter expanded 400 bps to 12.3%.
Financial Update
The company exited the full-year 2022 with cash and cash equivalents worth $127.7 million compared with $118.5 million at the end of 2021. Total debt at the end of the full-year 2022 was $232.5 million compared with $130 million at the end of 2021.
Cumulative net cash provided by operating activities at the end of 2022 totaled $90.9 million compared with net cash provided by operating activities of $87.3 million in the prior-year period.
Guidance
Avanos has issued its full-year 2023 adjusted EPS outlook.
The company anticipates full-year 2023 adjusted EPS between $1.60 and $1.80. The Zacks Consensus Estimate for the same currently stands at $1.64.
Per Avanos, excluding the expected impact of the product portfolio rationalization under the transformation plan, the company anticipates organic growth to be low single-digit.
Our Take
Avanos exited the fourth quarter of 2022 with better-than-expected results. The year-over-year improvement in the overall top and bottom lines was impressive. The strength exhibited by Avanos’ core Pain Management and Chronic Care segments was encouraging. The low single-digit growth in Acute Pain and mid-single-digit growth in Interventional Pain solutions are promising.
The continued strong demand for Avanos’ products and solutions, as evidenced by the double-digit growth in Game Ready and COOLIEF sales during the quarter, also augur well. Strength in Digestive Health, with robust growth in NeoMed (fueled by strong execution of customer conversions to Avanos’ ENFit technology), was impressive. The expansion of both margins bodes well.
Yet, the year-over-year decline in the Respiratory health business is disappointing. The continued supply headwinds, particularly within Avanos’ surgical pain category, and management’s expectations that these headwinds would remain a factor throughout the first part of 2023 raise our apprehension. Other issues like hospital staff shortages that have kept elective procedure levels at a lower level and inflation impacting Avanos’ business also raise our apprehension.
Zacks Rank and Key Picks
Avanos currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
BD, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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Avanos (AVNS) Q4 Earnings Surpass Estimates, Margins Up
Avanos Medical, Inc. (AVNS - Free Report) reported fourth-quarter 2022 adjusted earnings per share (EPS) of 60 cents, up 20% year over year. The bottom line surpassed the Zacks Consensus Estimate by 25%.
Our projection of adjusted EPS was 47 cents.
GAAP EPS in the quarter under review was 36 cents, up 50% year over year.
Full-year adjusted EPS was $1.65, up 41% from the end of 2021. Our projection of full-year adjusted EPS was $1.52.
Revenues
Revenues grossed $217.5 million in the reported quarter, up 12.5% year over year. The metric exceeded the Zacks Consensus Estimate by 1.1%.
The fourth-quarter revenue compares to our estimate of $215 million.
In the fourth quarter, volume was driven by continued strong demand for Digestive Health products and improvements in Interventional Pain solutions. However, this was partially offset by a lower volume of Respiratory Health products compared to the pandemic-driven demand in the prior year and an expected lower volume of Acute Pain products due to fewer elective procedures.
At constant exchange rate (CER), net sales increased by 14%.
Full-year revenues were $820 million, reflecting a 10.1% improvement from the comparable 2021 period. At CER, net sales increased by 12%.
Our projection of full-year revenues was $817.5 million.
Q4 Segmental Analysis
Avanos provides a portfolio of innovative product offerings that focuses on Pain Management and Chronic Care.
Pain Management’s net revenues of $88.7 million increased 30.8% on a year-over-year basis. Excluding the OrthogenRx buyout and the negative impact of currency, the business recorded a year-over-year sales uptick of 2.6%. The business saw double-digit growth for Game Ready and COOLIEF products, partially offset by continued headwinds in On-Q.
This figure compares to our Pain Management segment’s fourth-quarter projection of $87.1 million.
Chronic Care’s net revenues of $128.8 million improved 2.5% year over year, owing to strength in Digestive Health. Excluding Maxter and the negative impact of currency, sales grew almost 6% year over year. The business saw continued execution for NeoMed and high single-digit demand for Avanos’ closed suction catheter products.
This figure compares to our Chronic Care segment’s fourth-quarter projection of $127.9 million.
Avanos Medical, Inc. Price, Consensus and EPS Surprise
Avanos Medical, Inc. price-consensus-eps-surprise-chart | Avanos Medical, Inc. Quote
Margin Analysis
In the quarter under review, Avanos’ gross profit rose 18.2% to $116.9 million. Gross margin expanded 261 basis points (bps) to 53.7%.
Selling and general expenses rose 9.8% to $82.6 million. Research and development expenses declined 1.3% year over year to $7.5 million. Adjusted operating expenses of $90.1 million increased 8.8% year over year.
Adjusted operating profit totaled $26.8 million, reflecting a 66.5% uptick from the prior-year quarter. The adjusted operating margin in the fourth quarter expanded 400 bps to 12.3%.
Financial Update
The company exited the full-year 2022 with cash and cash equivalents worth $127.7 million compared with $118.5 million at the end of 2021. Total debt at the end of the full-year 2022 was $232.5 million compared with $130 million at the end of 2021.
Cumulative net cash provided by operating activities at the end of 2022 totaled $90.9 million compared with net cash provided by operating activities of $87.3 million in the prior-year period.
Guidance
Avanos has issued its full-year 2023 adjusted EPS outlook.
The company anticipates full-year 2023 adjusted EPS between $1.60 and $1.80. The Zacks Consensus Estimate for the same currently stands at $1.64.
Per Avanos, excluding the expected impact of the product portfolio rationalization under the transformation plan, the company anticipates organic growth to be low single-digit.
Our Take
Avanos exited the fourth quarter of 2022 with better-than-expected results. The year-over-year improvement in the overall top and bottom lines was impressive. The strength exhibited by Avanos’ core Pain Management and Chronic Care segments was encouraging. The low single-digit growth in Acute Pain and mid-single-digit growth in Interventional Pain solutions are promising.
The continued strong demand for Avanos’ products and solutions, as evidenced by the double-digit growth in Game Ready and COOLIEF sales during the quarter, also augur well. Strength in Digestive Health, with robust growth in NeoMed (fueled by strong execution of customer conversions to Avanos’ ENFit technology), was impressive. The expansion of both margins bodes well.
Yet, the year-over-year decline in the Respiratory health business is disappointing. The continued supply headwinds, particularly within Avanos’ surgical pain category, and management’s expectations that these headwinds would remain a factor throughout the first part of 2023 raise our apprehension. Other issues like hospital staff shortages that have kept elective procedure levels at a lower level and inflation impacting Avanos’ business also raise our apprehension.
Zacks Rank and Key Picks
Avanos currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company (BDX - Free Report) , popularly known as BD, McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
BD, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.