Avanos Medical, Inc. AVNS is well poised for growth backed by strong performing segments – Chronic Care and Pain Management, and robust product portfolio. However, weak performance at its Acute Pain unit remains a concern.
Shares of Avanos Medical have lost 46%, compared with the industry’s decline of 14.9% in a year’s time. Meanwhile, the S&P 500 Index has fallen 14.2% in the same timeframe.
Avanos Medical, with a market capitalization of $1.14 billion, is a medical technology company which offers infection prevention, surgical, respiratory, digestive health and pain management solutions. It anticipates earnings to improve 19.5% over the next five years. Moreover, it has a trailing four-quarter positive earnings surprise of 0.1%, on average.
Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).
What’s Deterring the Stock?
Avanos continues to witness pressure in its Acute Pain business, which exhibited weak performance in fourth-quarter 2019. Per management, ON-Q sales declined in low-single-digits globally in the quarter. Sales also declined in low-single-digits in North America.
What’s Favoring the Stock?
Avanos reports through two broad segments — Chronic Care and Pain Management. Both the segments displayed solid performance in fourth-quarter 2019, thereby contributing to the company’s top line. We expect the company to continue gaining from these strong performing segments in the near term.
Avanos boasts a broad product spectrum, which is a significant contributor to the top line. In fourth-quarter 2019, the company received FDA clearance for its new 80-Watt COOLIEF Radiofrequency System for neurological lesion procedures. Management is also optimistic regarding the upcoming launch of its next generation enteral feeding tube Mic-Key.
Notably, the company offers an innovative portfolio focused on respiratory and digestive health, and surgical and interventional pain management to improve patient outcome and reduce cost of care. These products include post-operative pain management solutions, minimally-invasive interventional (or chronic) pain therapies, closed airway suction systems and enteral feeding tubes.
For 2020, the Zacks Consensus Estimate for revenues is pegged at $705.9 million, indicating an improvement of 1.2% from the prior-year quarter. The same for earnings stands at $1.02, suggesting a decline of 4.7% from the year-ago reported figure.
Stocks to Consider
Some better-ranked stocks from the broader medical space include McKesson Corporation MCK, Merit Medical Systems, Inc. MMSI and The Cooper Companies, Inc. COO, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McKesson has an estimated long-term earnings growth rate of 6.1%.
Merit Medical has an estimated long-term earnings growth rate of 12.1%.
Cooper Companies has a projected long-term earnings growth rate of 10.8%.
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