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Avanos (AVNS) Q2 Earnings and Revenues Fall Shy of Estimates
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Avanos Medical, Inc. (AVNS - Free Report) reported second-quarter 2023 adjusted earnings per share (EPS) of 24 cents, down 7.7% year over year. The bottom line missed the Zacks Consensus Estimate by 29.4%.
GAAP loss per share in the quarter under review was 9 cents against the year-ago period’s EPS of 10 cents.
Revenues
Revenues grossed $169.4 million in the reported quarter, down 0.9% year over year. The metric lagged the Zacks Consensus Estimate by 12.6%.
Per management, the top line was hampered by a lower volume in the Pain Management and Recovery portfolio, primarily from lower hyaluronic acid portfolio (HA) sales. However, this was offset by a higher volume in the Digestive Health portfolio.
Excluding both the negative impact of foreign exchange and the $5 million impact related to Avanos’ previously announced decision to eliminate revenues that were not meeting its returns criteria, organic growth was 2.6% in the quarter.
Segmental Analysis
Avanos provides a portfolio of innovative product offerings that focuses on Pain Management and Recovery and Digestive Health.
Pain Management and Recovery’s net revenues of $76.4 million decreased 15.8% year over year on a reported basis. At constant exchange rate (CER), revenues were down 11%. The segment saw soft results across the Interventional pain, Game Ready and 5-shot HA product categories, each of which was down in the second quarter versus the prior-year period. The surgical pain pump business was also flat during the quarter. This figure compares to our second-quarter projection of $83.3 million.
Digestive Health’s net revenues of $93 million improved 15.9% year over year. At CER, revenues were up nearly 17%, owing to strength in the med product line. The business saw continued strong execution for NeoMed. Avanos’ legacy intra-feeding product line grew in double digits globally, primarily driven by the continued expansion of its U.S. CORTRAK standard of care offering. This figure compares to our second-quarter projection of $78.7 million.
Avanos Medical, Inc. Price, Consensus and EPS Surprise
In the quarter under review, Avanos’ gross profit fell 3.7% to $97.8 million. The gross margin contracted 172 basis points (bps) to 57.7%.
Selling and general expenses rose 11.8% to $93 million. Research and development expenses decreased 10.5% year over year to $6.8 million. Adjusted operating expenses of $99.8 million increased 9.9% year over year.
Adjusted operating loss totaled $2 million against the prior-year quarter’s adjusted operating profit of $10.8 million.
Financial Update
The company exited second-quarter 2023 with cash and cash equivalents worth $81.8 million compared with $95.7 million at the end of first quarter. Total debt at the second-quarter end was $209.5 million compared with $210.9 million at the first-quarter end.
Cumulative net cash used in operating activities at the end of second-quarter 2023 totaled $9.4 million against net cash provided by operating activities of $28.8 million in the prior-year period.
Guidance
Avanos has adjusted its 2023 guidance for divestiture.
The company estimates its revenues for the full year in the range of $675 million-$685 million. The Zacks Consensus Estimate for the same currently stands at $802.4 million.
Avanos now anticipates 2023 adjusted EPS between $1.05 and $1.15, lowered from its previous outlook of $1.60-$1.80. The Zacks Consensus Estimate for the same currently stands at $1.63.
Our Take
Avanos’ strength in the Digestive Health segment in the second quarter of 2023 was encouraging. The robust growth in NeoMed and CORTRAK was promising. On the earnings call, management confirmed that TriVisc, Avanos’ 3-shot offering, continues to meet its internal performance expectations. This raises our optimism about the stock.
Yet, Avanos’ lower-than-expected results in the quarter were disappointing. The year-over-year decline in the top and bottom lines and lower revenues from Pain Management and Recovery segment were also discouraging. Management also confirmed during the earnings call that although supply-chain disruptions have lessened, Avanos continued to experience ongoing product supply challenges and the effects of inflation throughout its supply chain. These raise our apprehension. The contraction of gross margin does not bode well.
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 DexCom, Inc. (DXCM - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
DexCom, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2023 adjusted EPS of 34 cents, beating the Zacks Consensus Estimate by 54.6%. Revenues of $871.3 million outpaced the consensus mark by 4.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DexCom has a long-term estimated growth rate of 42.9%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 28.8%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.
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Avanos (AVNS) Q2 Earnings and Revenues Fall Shy of Estimates
Avanos Medical, Inc. (AVNS - Free Report) reported second-quarter 2023 adjusted earnings per share (EPS) of 24 cents, down 7.7% year over year. The bottom line missed the Zacks Consensus Estimate by 29.4%.
GAAP loss per share in the quarter under review was 9 cents against the year-ago period’s EPS of 10 cents.
Revenues
Revenues grossed $169.4 million in the reported quarter, down 0.9% year over year. The metric lagged the Zacks Consensus Estimate by 12.6%.
Per management, the top line was hampered by a lower volume in the Pain Management and Recovery portfolio, primarily from lower hyaluronic acid portfolio (HA) sales. However, this was offset by a higher volume in the Digestive Health portfolio.
Excluding both the negative impact of foreign exchange and the $5 million impact related to Avanos’ previously announced decision to eliminate revenues that were not meeting its returns criteria, organic growth was 2.6% in the quarter.
Segmental Analysis
Avanos provides a portfolio of innovative product offerings that focuses on Pain Management and Recovery and Digestive Health.
Pain Management and Recovery’s net revenues of $76.4 million decreased 15.8% year over year on a reported basis. At constant exchange rate (CER), revenues were down 11%. The segment saw soft results across the Interventional pain, Game Ready and 5-shot HA product categories, each of which was down in the second quarter versus the prior-year period. The surgical pain pump business was also flat during the quarter. This figure compares to our second-quarter projection of $83.3 million.
Digestive Health’s net revenues of $93 million improved 15.9% year over year. At CER, revenues were up nearly 17%, owing to strength in the med product line. The business saw continued strong execution for NeoMed. Avanos’ legacy intra-feeding product line grew in double digits globally, primarily driven by the continued expansion of its U.S. CORTRAK standard of care offering. This figure compares to our second-quarter projection of $78.7 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 fell 3.7% to $97.8 million. The gross margin contracted 172 basis points (bps) to 57.7%.
Selling and general expenses rose 11.8% to $93 million. Research and development expenses decreased 10.5% year over year to $6.8 million. Adjusted operating expenses of $99.8 million increased 9.9% year over year.
Adjusted operating loss totaled $2 million against the prior-year quarter’s adjusted operating profit of $10.8 million.
Financial Update
The company exited second-quarter 2023 with cash and cash equivalents worth $81.8 million compared with $95.7 million at the end of first quarter. Total debt at the second-quarter end was $209.5 million compared with $210.9 million at the first-quarter end.
Cumulative net cash used in operating activities at the end of second-quarter 2023 totaled $9.4 million against net cash provided by operating activities of $28.8 million in the prior-year period.
Guidance
Avanos has adjusted its 2023 guidance for divestiture.
The company estimates its revenues for the full year in the range of $675 million-$685 million. The Zacks Consensus Estimate for the same currently stands at $802.4 million.
Avanos now anticipates 2023 adjusted EPS between $1.05 and $1.15, lowered from its previous outlook of $1.60-$1.80. The Zacks Consensus Estimate for the same currently stands at $1.63.
Our Take
Avanos’ strength in the Digestive Health segment in the second quarter of 2023 was encouraging. The robust growth in NeoMed and CORTRAK was promising. On the earnings call, management confirmed that TriVisc, Avanos’ 3-shot offering, continues to meet its internal performance expectations. This raises our optimism about the stock.
Yet, Avanos’ lower-than-expected results in the quarter were disappointing. The year-over-year decline in the top and bottom lines and lower revenues from Pain Management and Recovery segment were also discouraging. Management also confirmed during the earnings call that although supply-chain disruptions have lessened, Avanos continued to experience ongoing product supply challenges and the effects of inflation throughout its supply chain. These raise our apprehension. The contraction of gross margin does not bode well.
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 DexCom, Inc. (DXCM - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
DexCom, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2023 adjusted EPS of 34 cents, beating the Zacks Consensus Estimate by 54.6%. Revenues of $871.3 million outpaced the consensus mark by 4.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DexCom has a long-term estimated growth rate of 42.9%. DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 28.8%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Intuitive Surgical reported second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 15.7%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 4.2%.