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Avanos (AVNS) Q2 Earnings Top Estimates, Gross Margin Contracts
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Avanos Medical, Inc. (AVNS - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) from continuing operations of 34 cents, up 41.7% year over year. The bottom line surpassed the Zacks Consensus Estimate by 17.2%.
GAAP EPS from continuing operations in the quarter under review was 9 cents against the year-ago period’s loss of 9 cents per share.
Revenues
Revenues grossed $171.7 million in the reported quarter, up 1.4% year over year. The metric beat the Zacks Consensus Estimate by 0.4%.
Organic sales were up 2.6% year over year.
Per management, the top line was boosted by continued strong demand and volume in Avanos's Digestive Health portfolio, primarily from the NeoMed neonatal and pediatric feeding solutions, as well as continued demand for Game Ready. However, this was partially offset by reduced demand for hyaluronic acid (HA) products.
Favorable volume overall was partially offset by pricing and currency translation effects.
Segmental Analysis
Avanos provides a portfolio of innovative product offerings that focus on Pain Management and Recovery and Digestive Health.
Pain Management and Recovery’s net revenues of $74 million decreased 3.1% year over year on a reported basis. This figure compares to our second-quarter projection of $69.6 million.
The normalized organic sales for the segment in the reported quarter were up 2%, excluding HA and inorganic sales related to Avanos’ Diros acquisition. Per management, the segment’s On-Q/ambIT products recorded mid-single-digit growth, while Game Ready witnessed double-digit growth in the reported quarter. Trident and HA sales were in line with the company’s expectations.
Digestive Health’s net revenues of $97.7 million improved 5.1% year over year. At constant exchange rate, revenues were up 9%. The business saw double-digit year-over-year growth in NeoMed sales and strength in legacy Enteral Feeding products. This figure compares to our second-quarter projection of $101.3 million.
Avanos Medical, Inc. Price, Consensus and EPS Surprise
In the quarter under review, Avanos’ gross profit fell 2.2% to $95.6 million. The gross margin contracted 205 basis points (bps) to 55.7%. We had projected 56.4% of gross margin for the second quarter.
Selling and general expenses declined 13% to $80.9 million. Research and development expenses decreased 7.4% year over year to $6.3 million. Adjusted operating expenses of $87.2 million decreased 12.6% year over year.
Adjusted operating profit totaled $8.4 million against the year-ago quarter’s adjusted operating loss of $2 million.
Financial Update
The company exited second-quarter 2024 with cash and cash equivalents worth $92.2 million compared with $75.8 million at the end of the first quarter. Total debt at the second-quarter end was $175.1 million compared with $176.6 million at the first-quarter end.
Cumulative net cash provided by operating activities at the end of second-quarter 2024 totaled $19.8 million against cumulative net cash used in operating activities of $9.4 million in the prior-year period.
Guidance
Avanos has reiterated its 2024 outlook.
The company continues to estimate its net sales for the full year in the range of $685 million-$705 million, reflecting organic growth of 3-6%. The Zacks Consensus Estimate currently stands at $694.7 million.
Avanos continues to anticipate 2024 adjusted EPS between $1.30 and $1.45. The Zacks Consensus Estimate currently stands at $1.38.
Our Take
Avanos’ ended the second quarter of 2024 with better-than-expected results. Strong overall top-line and bottom-line results and its continued strength in the Digestive Health segment in the quarter were encouraging. The robust growth in NeoMed and continued demand for Game Ready were promising. Strength in the legacy Enteral Feeding business during the quarter was also encouraging.
On the earnings call, management confirmed that the strong demand for ENFit conversions in North America continues to aid the company. Management also commented that its Interventional Pain (IVP) business returned to growth in the second quarter, with Avanos’ combined Radio Frequency Ablation portfolio increasing mid-single-digits year over year. Management was also encouraged by the continued momentum seen in the IVP generator sales, accompanied by capturing higher procedural volumes. These raise our optimism about the stock.
Yet, Avanos’ continued year-over-year decline in the Pain Management and Recovery segment was discouraging. The contraction of the gross margin does not bode well.
Zacks Rank and Key Picks
Avanos currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Quest Diagnostics Incorporated (DGX - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Abbott, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2024 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion outpaced the consensus mark by 0.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 8.6%. ABT’s earnings surpassed estimates in three of the trailing four quarters and broke even once, the average surprise being 2.3%.
Quest Diagnostics reported second-quarter 2024 adjusted EPS of $2.35, beating the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion surpassed the Zacks Consensus Estimate by 0.5%. It currently carries a Zacks Rank #2.
Quest Diagnostics has a long-term estimated growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.
Boston Scientific reported second-quarter 2024 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 6.9%. Revenues of $4.12 billion surpassed the Zacks Consensus Estimate by 2.5%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.
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Avanos (AVNS) Q2 Earnings Top Estimates, Gross Margin Contracts
Avanos Medical, Inc. (AVNS - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) from continuing operations of 34 cents, up 41.7% year over year. The bottom line surpassed the Zacks Consensus Estimate by 17.2%.
GAAP EPS from continuing operations in the quarter under review was 9 cents against the year-ago period’s loss of 9 cents per share.
Revenues
Revenues grossed $171.7 million in the reported quarter, up 1.4% year over year. The metric beat the Zacks Consensus Estimate by 0.4%.
Organic sales were up 2.6% year over year.
Per management, the top line was boosted by continued strong demand and volume in Avanos's Digestive Health portfolio, primarily from the NeoMed neonatal and pediatric feeding solutions, as well as continued demand for Game Ready. However, this was partially offset by reduced demand for hyaluronic acid (HA) products.
Favorable volume overall was partially offset by pricing and currency translation effects.
Segmental Analysis
Avanos provides a portfolio of innovative product offerings that focus on Pain Management and Recovery and Digestive Health.
Pain Management and Recovery’s net revenues of $74 million decreased 3.1% year over year on a reported basis. This figure compares to our second-quarter projection of $69.6 million.
The normalized organic sales for the segment in the reported quarter were up 2%, excluding HA and inorganic sales related to Avanos’ Diros acquisition. Per management, the segment’s On-Q/ambIT products recorded mid-single-digit growth, while Game Ready witnessed double-digit growth in the reported quarter. Trident and HA sales were in line with the company’s expectations.
Digestive Health’s net revenues of $97.7 million improved 5.1% year over year. At constant exchange rate, revenues were up 9%. The business saw double-digit year-over-year growth in NeoMed sales and strength in legacy Enteral Feeding products. This figure compares to our second-quarter projection of $101.3 million.
Avanos Medical, Inc. Price, Consensus and EPS Surprise
Avanos Medical, Inc. price-consensus-eps-surprise-chart | Avanos Medical, Inc. Quote
Margin Analysis
In the quarter under review, Avanos’ gross profit fell 2.2% to $95.6 million. The gross margin contracted 205 basis points (bps) to 55.7%. We had projected 56.4% of gross margin for the second quarter.
Selling and general expenses declined 13% to $80.9 million. Research and development expenses decreased 7.4% year over year to $6.3 million. Adjusted operating expenses of $87.2 million decreased 12.6% year over year.
Adjusted operating profit totaled $8.4 million against the year-ago quarter’s adjusted operating loss of $2 million.
Financial Update
The company exited second-quarter 2024 with cash and cash equivalents worth $92.2 million compared with $75.8 million at the end of the first quarter. Total debt at the second-quarter end was $175.1 million compared with $176.6 million at the first-quarter end.
Cumulative net cash provided by operating activities at the end of second-quarter 2024 totaled $19.8 million against cumulative net cash used in operating activities of $9.4 million in the prior-year period.
Guidance
Avanos has reiterated its 2024 outlook.
The company continues to estimate its net sales for the full year in the range of $685 million-$705 million, reflecting organic growth of 3-6%. The Zacks Consensus Estimate currently stands at $694.7 million.
Avanos continues to anticipate 2024 adjusted EPS between $1.30 and $1.45. The Zacks Consensus Estimate currently stands at $1.38.
Our Take
Avanos’ ended the second quarter of 2024 with better-than-expected results. Strong overall top-line and bottom-line results and its continued strength in the Digestive Health segment in the quarter were encouraging. The robust growth in NeoMed and continued demand for Game Ready were promising. Strength in the legacy Enteral Feeding business during the quarter was also encouraging.
On the earnings call, management confirmed that the strong demand for ENFit conversions in North America continues to aid the company. Management also commented that its Interventional Pain (IVP) business returned to growth in the second quarter, with Avanos’ combined Radio Frequency Ablation portfolio increasing mid-single-digits year over year. Management was also encouraged by the continued momentum seen in the IVP generator sales, accompanied by capturing higher procedural volumes. These raise our optimism about the stock.
Yet, Avanos’ continued year-over-year decline in the Pain Management and Recovery segment was discouraging. The contraction of the gross margin does not bode well.
Zacks Rank and Key Picks
Avanos currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories (ABT - Free Report) , Quest Diagnostics Incorporated (DGX - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Abbott, carrying a Zacks Rank of 2 (Buy), reported second-quarter 2024 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion outpaced the consensus mark by 0.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 8.6%. ABT’s earnings surpassed estimates in three of the trailing four quarters and broke even once, the average surprise being 2.3%.
Quest Diagnostics reported second-quarter 2024 adjusted EPS of $2.35, beating the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion surpassed the Zacks Consensus Estimate by 0.5%. It currently carries a Zacks Rank #2.
Quest Diagnostics has a long-term estimated growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.3%.
Boston Scientific reported second-quarter 2024 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 6.9%. Revenues of $4.12 billion surpassed the Zacks Consensus Estimate by 2.5%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.