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Avanos Medical (AVNS) Down 1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Avanos Medical (AVNS). Shares have lost about 1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Avanos Medical due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Avanos Medical  Q4 Earnings and Revenues Top Estimates

Avanos Medical, Inc. reported adjusted earnings per share of 28 cents for fourth-quarter 2020, beating the Zacks Consensus Estimate of 22 cents by 27.3%. However, the bottom line fell 17.6% year over year.

For 2020, adjusted earnings per share came in at 79 cents, beating the Zacks Consensus Estimate of 72 cents by 9.7%. The bottomline, however, fell 26.2% year over year.

Revenues

Revenues for the quarter were $185 million, which beat the Zacks Consensus Estimate by 0.7%. However, the top line dipped 2.5% on a year-over-year basis.

For 2020, revenues summed $714.8 million, beating the Zacks Consensus Estimate by a marginal 0.1%. Also, the top line inched up2.5% on a year-over-year basis.

Q4 Segmental Analysis

Chronic Care

Net revenues of $116 million rose 2.3% year over year.

Pain Management

Net revenues of $69 million declined 9.7% on a year-over-year basis.

Margin Analysis

Gross profit was $89 million, down 18.9% from the prior-year quarter. Gross margin was 48.1% of net revenues, down 974 bps year over year.

Total adjusted operating cost came in at 92 million, down 18% year over year.

Adjusted operating loss in the fourth quarter was $3 million, wider than adjusted operating loss of $2.3 million in the year-ago quarter.

Financial Update

As of Dec 31, 2020, cash and cash equivalents totaled $111.5 million compared with $205.3 million in the year-ago period.

Cumulative net cash used in operating activities at the end of the fourth quarter totaled

$2.5 million compared with net cash utilized in operating activities of $74.5 million in the prior-year quarter.

Guidance

In view of the ongoing uncertainty related to the COVID-19 pandemic, the company will not be issuing its 2021 guidance. This is because at this point,it is unable to fully quantify the scope or duration of the pandemic impact on its financial results.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -12.2% due to these changes.

VGM Scores

Currently, Avanos Medical has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Avanos Medical has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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