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Avanos Medical (AVNS) Q2 Earnings Lag Estimates, Revenues Top

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Avanos Medical, Inc. AVNS reported adjusted earnings per share (EPS) of 21 cents for second-quarter 2021, missing the Zacks Consensus Estimate of 23 cents by 8.7%. However, the bottom line improved 61.5% year over year.

GAAP EPS in the quarter under review was 78 cents, against the year-ago quarter’s loss of 6 cents.

Revenues

Revenues for the Zacks Rank #2 (Buy) company were $186.4 million, which beat the Zacks Consensus Estimate by 2.4%. The top line increased 13.9% on a year-over-year basis.

The top-line performance was driven by strength shown by the pain management segment owing to the continued recovery of elective surgical procedures and favorable comparison to year-ago quarter’s sales, which were adversely affected by the COVID-19 pandemic. Apart from this, sustained robust demand for Digestive Health contributed to the upside. However, unfavorable price and mix of 1% offset the improvement.

Q2 Segmental Analysis

Chronic Care

Net revenues of $116 million declined 3.5% year over year.

AVANOS MEDICAL, INC. Price, Consensus and EPS Surprise

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

Pain Management

Net revenues of $70.4 million surged 61.8% on a year-over-year basis.

Margin Analysis

Gross profit was $85.7 million, down 0.9% from the prior-year quarter. Gross margin was 45.9% of net revenues, down 690 bps year over year.

Research and development expenses amounted to $8 million in the quarter under review, up 3.9% from the year-ago quarter. Selling and general expenses totaled $76.7 million, down 0.3% from the prior-year quarter.

Operating loss in the second quarter was $7.3 million, wider than the year-ago quarter’s loss of $1.8 million.

Financial Update

The company exited the second quarter of 2021 with cash and cash equivalents worth $99.9 million compared with $100.1 million in the first quarter of 2021.

Cumulative net cash used in operating activities at the end of the second quarter totaled $12 million compared with net cash used in operating activities of $4.7 million in the prior-year quarter.

Guidance

The company continues to maintain its 2021 outlook for net sales to grow in the range of 2% to 4% on constant currency basis from the previous year. The Zacks Consensus Estimate for revenues is pegged at $742.3 million.

The company has revised its full-year 2021 earnings outlook. The adjusted EPS for 2021 is now projected between $1.10 and $1.20 (upper end view clipped from the prior range of $1.10-$1.25). The Zacks Consensus Estimate for the same stands at $1.21.

Summing Up

Avanos exited the second quarter on a mixed note, wherein earnings missed the consensus mark but revenues beat the same. Strength exhibited by its core Pain Management segment is encouraging. Per management, recovery in elective procedures and execution of its growth initiatives, demonstrated by its COOLIEF and Game Ready therapies (improved from the pre-pandemic second quarter of 2019) contributed to the second-quarter results. Robust demand for Digestive Health amid the pandemic aided the company’s quarterly performance.

However, contraction in gross margin remains a woe. Weakness in the Chronic Management segment is concerning. Being a pure-play MedTech company, it faces stiff competition from other industry players.

Earnings of Other MedTech Majors at a Glance

Some other top-ranked stocks in the broader medical space that have already announced their quarterly results are Encompass Health Corporation EHC, West Pharmaceutical Services, Inc. WST and Chemed Corporation CHE. While both Encompass Health and West Pharmaceutical sport a Zacks Rank #1 (Strong Buy), Chemed carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encompass Health reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%.

Chemed reported second-quarter 2021 adjusted EPS of $4.60, surpassing the Zacks Consensus Estimate by 3.4%. Revenues of $532.3 million exceeded the Zacks Consensus Estimate by 0.8%.


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