Here's Why You Should Retain Avanos Medical Stock for Now
Avanos Medical, Inc. AVNS is well poised for growth on the back of robust performing segments — Chronic Care and Pain Management, and strong product portfolio. However, stiff competition remains a concern.
Shares of Avanos Medical have lost 38.3%, against the industry’s rally of 7.9% in a year’s time. Meanwhile, the S&P 500 Index has inched up 0.5% in the same timeframe.
Avanos Medical, with a market capitalization of $1.25 billion, is a medical technology company that offers infection prevention, surgical, respiratory, digestive health and pain management solutions. It anticipates earnings to improve 13.2% over the next five years. Moreover, it has a trailing four-quarter positive earnings surprise of 1.5%, 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 faces significant competition in both U.S. and international markets. Consequently, intense competition continues to weigh on margins.
What’s Favoring It?
Avanos reports through two broad segments — Chronic Care and Pain Management. Both the segments performed robustly in first-quarter 2020, 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.The launch of this new generator together with robust clinical evidence highlighting the efficiency of COOLIEF is anticipated to drive growth.
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.
Estimates Trend
For 2020, the Zacks Consensus Estimate for revenues is pegged at $670 million, indicating a decline of 3.9% from the prior year. The same for earnings stands at 59 cents per share, suggesting a decline of 44.9% from the year-ago comparable period.
Key Picks
Some better-ranked stocks from the broader medical space include Aphria Inc. APHA, HMS Holdings Corp. HMSY and West Pharmaceutical Services, Inc. WST, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Aphria has an estimated long-term earnings growth rate of 24.6%.
HMS Holdings has an estimated long-term earnings growth rate of 11%.
West Pharmaceutical has a projected long-term earnings growth rate of 9.2%.
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