It has been about a month since the last earnings report for Avanos Medical (AVNS). Shares have lost about 1.8% 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 the most recent earnings report in order to get a better handle on the important drivers.
Avanos Earnings and Revenues Miss Estimates in Q3
Avanos Medical, Inc. 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
Net revenues at this segment amounted to $98 million, up 4.7% year over year.
The segment reported net revenues of $73.4 million. The metric improved 2.7% on a year-over-year basis.
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.
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.
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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -26.55% due to these changes.
At this time, Avanos Medical has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Avanos Medical has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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