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Avanos (AVNS) Earnings and Revenues Miss Estimates in Q3

Zacks Equity Research

Avanos Medical, Inc. AVNS reported adjusted earnings of 30 cents per share in third-quarter 2019, which missed the Zacks Consensus Estimate by 6.3%. The bottom line also declined 18.9% year over year.

Revenues of $171.4 million lagged the Zacks Consensus Estimate by 5.1%. However, the figure improved 3.8% on a year-over-year basis.

Q3 Segmental Analysis

Chronic Care

Net revenues at this segment amounted to $98 million, up 4.7% year over year.

Pain Management

The segment reported net revenues of $73.4 million. The metric improved 2.7% on a year-over-year basis.

AVANOS MEDICAL, INC. Price, Consensus and EPS Surprise

 

AVANOS MEDICAL, INC. Price, Consensus and EPS Surprise

AVANOS MEDICAL, INC. price-consensus-eps-surprise-chart | AVANOS MEDICAL, INC. Quote

Margin Analysis

Adjusted gross profit came in at $98.4 million, down 8.3% from the prior-year quarter figure. Adjusted gross margin was 57.4% of net revenues, down 760 bps year over year.

Research and development expenses totaled $9.6 million, down 8.6% year over year. Selling, general and administrative expenses amounted to $94.4 million, up 9.4% year over year.

Adjusted operating profit in the third quarter was $21 million, down 14.6% on a year-over-year basis.
The company reported operating loss of $18.1 million in the quarter under review against the year-ago quarter’s operating income of $7 million.

Financial Update

As of Sep 30, 2019, cash and cash equivalents totaled $214.4 million, down 25.6% sequentially.

Net cash from operating activities for the three months ended Sep 30, 2019, amounted to ($16.6) million, narrower than ($67.8) million from the prior-year quarter.

Guidance Revised

For 2019, Avanos now projects adjusted earnings per share to range between $1.00 and $1.10 compared with the prior guided range of $1.15-$1.25.

Avanos anticipates 2019 net revenues to increase 5-7% year over year (down from the previously guided estimate of 8-10%), on a constant-currency basis (including Summit Medical and Endoclear).

Notably, the other key planning assumptions that management provided in the year-end 2018 conference call remain unchanged.

Summing Up

Avanos exited the third quarter on a weak note, wherein both earnings and revenues missed the consensus mark. The company continues to gain from its core segments — Chronic Care and Pain Management. Notably, it completed the Endoclear LLC buyout and also entered into an operating partnership with DHL Supply Chain to enhance Avanos’ network achieve greater productivity and maximize warehouse storage utilization.

However, Avanos’ Acute Pain unit has been witnessing weak performance of late. In fact, the company anticipates the headwinds impacting this unit to persist throughout the balance of the year. Moreover, being a pure-play MedTech company, it faces stiff competition from other industry players.

Zacks Rank

Currently, Avanos carries a Zacks Rank #4 (Sell).

Earnings of Other MedTech Majors at a Glance

Some better-ranked stocks that reported solid results this earning season are Edwards Lifesciences EW, Thermo Fisher Scientific Inc. TMO and ResMed Inc. RMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted EPS of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Third-quarter net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%.

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%.

ResMed reported third-quarter 2019 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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