3 Reasons to Add Avanos (AVNS) Stock to Your Portfolio
Avanos Medical, Inc. AVNS has been gaining from its impressive product line. The optimism led by a solid fourth-quarter 2022 performance and continued focus on its Research and Development (R&D) are expected to contribute further. However, stiff competition and uncertainty in the healthcare industry persist.
Over the past year, this Zacks Rank #2 (Buy) stock has lost 10.2% compared with 17.1% decline of the industry and 9.9% fall of the S&P 500 composite.
The renowned medical device solutions provider has a market capitalization of $1.42 billion. The company projects 1.8% growth for 2023 and expects to maintain its strong performance. Avanos’ earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 11%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Product Portfolio: Avanos’ robust product suite raises our optimism. On the fourth-quarter 2022 earnings call in February, Avanos’ management confirmed that within the Digested Health portfolio, NeoMed grew nearly 4% globally, fueled by strong execution of customer conversions to ENFit technology. At constant exchange rate, the adjusted portfolio grew by double digits, with NeoMed growing nearly 40%. The positive trends across the company’s Digestive Health franchise continued as second-half supply improvements enabled Avanos to maximize North American ENFit conversions.
Focus on R&D: We are upbeat about Avanos’ continued focus on its R&D wing to commercialize new products, and enhance the effectiveness, reliability and safety of the existing ones. The company has been investing to expand the indications for the use of its pain products with clinical research and studies, as well as associated new product developments. It is also expanding its portfolio with customer-preferred product enhancements.
Strong Q4 Results: Avanos’ robust fourth-quarter 2022 results buoy optimism. The company saw year-over-year improvement in the overall top and bottom lines. The strength in Avanos’ core Pain Management and Chronic Care segments was also seen. Growth in Acute Pain and Interventional Pain solutions was registered. The expansion of both margins was also recorded.
Downsides
Uncertainty in Healthcare Industry: Various government authorities periodically review and assess alternative healthcare delivery systems and payment methods. Avanos cannot predict with certainty what healthcare initiatives, if any, will be implemented by the governments, or what ultimate effect healthcare reform or any future legislation or regulation may have on the company’s customers’ purchasing decisions regarding its products. However, the implementation of new legislation and regulation may lower reimbursements for Avanos’ products, reduce medical procedure volumes and adversely affect its business.
Competition: Avanos faces significant competition in both the United States and international markets. Competitors of its products are fragmented by particular product categories and the individual markets for these products are also highly competitive. Such an intensely competitive landscape is likely to put pressure on margins.
Estimate Trend
Avanos is witnessing a positive estimate revision trend for 2023. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved 2.4% north to $1.68.
The Zacks Consensus Estimate for the company’s first-quarter 2023 revenues is pegged at $194.7 million, suggesting a 1.4% decline from the year-ago quarter’s reported number.
This compares to our first-quarter revenue estimate of $194.4 million, suggesting a 1.5% fall from the year-ago quarter’s reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space are Hologic, Inc. HOLX, Cardinal Health, Inc. CAH and Masimo Corporation MASI.
Hologic, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 3.6% against the industry’s 17.1% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and lagged the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 34.3% against the industry’s 5.8% decline over the past year.
Masimo, carrying a Zacks Rank #2 at present, has an estimated growth rate of 3.5% for 2023. MASI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 9%.
Masimo has gained 23.5% against the industry’s 17.1% decline over the past year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
Hologic, Inc. (HOLX) : Free Stock Analysis Report
Masimo Corporation (MASI) : Free Stock Analysis Report
AVANOS MEDICAL, INC. (AVNS) : Free Stock Analysis Report
