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Avanos (AVNS) Q2 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

Avanos Medical, Inc. AVNS reported adjusted earnings of 28 cents per share in second-quarter 2019, which beat the Zacks Consensus Estimate by 12%. However, the bottom line plunged 41.7% year over year.

Revenues of $172.2 million missed the Zacks Consensus Estimate by 0.3%. However, the figure improved 7% on a year-over-year basis.

Q2 Segmental Analysis

Chronic Care

Net revenues at this segment amounted to $102.3 million, up 5.4% year over year.

Pain Management

The segment reported net revenues of $69.9 million. The metric advanced 9.6% on a year-over-year basis.

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

Margin Analysis

Adjusted gross profit came in at $103.4 million, up 7.4% from the prior-year quarter figure. Adjusted gross margin was 60% of net revenues, up 10 bps year over year.

Research and development expenses totaled $9.5 million, down 12% year over year. Selling, general and administrative expenses amounted to $94.7 million, up 18.7% year over year.

Adjusted operating profit in the second quarter was $19.5 million, improving 25% on a year-over-year basis.

The company reported operating loss of $9.8 million in the quarter under review, against the year-ago quarter’s operating income of $8.8 million.

Financial Update

As of Jun 30, 2019, cash and cash equivalents totaled $288.1 million, down 25.1% from 2018-end level.

Net cash from operating activities for the three months ended Jun 30, 2019, amounted to ($31.9) million, narrower than ($96.7) million from the prior-year quarter.

Guidance Revised

For 2019, Avanos now projects adjusted earnings per share to range between $1.15 and $1.25 compared to the prior guided range of $1.15-$1.35.

Avanos anticipates 2019 net revenues to increase 8-10% year over year (up from the previously guided estimate of 6-8%), on a constant-currency basis (including Game Ready and now NeoMed).

Notably, the other key planning assumptions that management provided in the 2018 conference call remain unchanged.

Zacks Rank

Currently, Avanos carries a Zacks Rank #3 (Hold).

Summing Up

Avanos exited the second quarter on a mixed note, wherein the bottom line beat the consensus mark, while the top line missed the same. The company continues to gain from its core segments — Chronic Care and Pain Management. Notably, it completed the NeoMed, Inc. buyout and also entered into an agreement to acquire Summit Medical Products – a leading developer and manufacturer of electronic infusion pumps, which complements the company’s Acute Pain business. Moreover, gross margin expansion is an added positive.

However, Avanos’ Acute Pain unit has been witnessing weak performance in recent times. In fact, the company anticipates the headwinds impacting this unit to persist throughout the remaining portion of the year. Moreover, being a pure-play MedTech company, it faces stiff competition from other bigwigs in the industry.

Earnings of Other MedTech Majors at a Glance

Some other top-ranked stocks which reported solid results this earning season are Stryker Corporation SYK, Baxter International Inc. BAX and Intuitive Surgical, Inc. ISRG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered second-quarter 2019 adjusted earnings per share of $1.98, beating the Zacks Consensus Estimate by 2.6%. Revenues of $3.65 billion surpassed the Zacks Consensus Estimate by 1.4%.

Baxter delivered second-quarter 2019 adjusted earnings of 89 cents per share, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Revenues of $2.84 billion outpaced the Zacks Consensus Estimate of $2.79 billion by 1.9%.

Intuitive Surgical reported second-quarter 2019 adjusted earnings per share of $3.25, which beat the Zacks Consensus Estimate of $2.85. Revenues were $1.1 billion, outpacing the Zacks Consensus Estimate of $1.03 billion.

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