It has been about a month since the last earnings report for Avanos Medical (AVNS). Shares have lost about 0.5% 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 Q3 Earnings Beat Estimates, Raises '25 Sales View
Avanos Medical reported third-quarter 2025 adjusted earnings per share (EPS) from continuing operations of 22 cents, down 38.9% year over year. However, the bottom line beat the Zacks Consensus Estimate of 16 cents by 37.5%.
GAAP loss per share from continuing operations in the quarter under review was 3 cents against the year-ago period’s EPS of 12 cents.
Avanos' Revenues
Revenues totaled $177.8 million in the reported quarter, up 4.3% year over year. The metric beat the Zacks Consensus Estimate by 6.9%.
The top line gained from higher volume across both its Specialty Nutrition Systems ("SNS") and Pain Management and Recovery ("PM&R") segments.
Shares of the company gained nearly 0.1% in after-market trading during Nov. 5. The company’s shares have plunged 33.1% in the year-to-date period compared with the industry’s decline of 0.1%. The broader S&P 500 Index has increased 16.7% in the same time frame.
AVNS' Segmental Analysis
Avanos generates revenues from three segments — SNS, PM&R and Corporate and Other.
PM&R segment’s revenues in the third quarter of 2025 totaled $59 million, up 2.1% year over year. This figure compares to our projection of $57.7 million.
The PM&R segment’s volume growth in Radio Frequency Ablation ("RFA") was partially offset by reduced volume in our surgical pain and recovery product lines. Net sales of RFA products grew 10.5% year over year to $34.6million, reflecting momentum in RFA generator sales. Net sales in the surgical pain and recovery unit declined 7.9% year over year to $24.4 million, primarily due to lower volume in the Game Ready product line.
SNS segment’s revenues totaled $114 million, up 16.1% year over year. This figure compares to our third-quarter projection of $98.1 million.
The segment recorded 14% volume growth, driven by continued strong demand across both Avanos’ enteral feeding and neonate solutions categories, especially long-term feeding products and US CORTRAK standard of care offerings.
Enteral feeding unit’s revenues totaled $82.7 million for the third quarter of 2025 (up 14.9% year over year), while Neonate solutions unit’s revenues amounted to $31.3 million (up 19.5% year over year).
Corporate and Other segment’s revenues totaled $4.8 million, down 66.7% year over year. The segment includes the Hyaluronic Acid (HA) injections and intravenous infusion product lines.
In July, AVNS announced the divestiture of its HA product line to Channel-Markers Medical, LLC, a privately held company. This transaction aligns with the company’s ongoing transformation, which is focused on advancing its strategic segments in PM&R and SNS.
Avanos' Margin Analysis
In the quarter under review, Avanos’ adjusted gross profit declined 4.7% year over year to $97.4 million. The adjusted gross margin contracted 390 basis points (bps) to 55.7%. We had projected a gross margin of 56% for the third quarter.
Selling and general expenses increased 3.2% year over year to $83.5million. Research and development expenses decreased 7.9% year over year to $5.8 million. Adjusted operating expenses of $89.3 million increased 2.4% year over year.
Adjusted operating profit totaled $12.2 million, reflecting a 44% decrease from the prior-year quarter’s level. The adjusted operating margin contracted 580 bps to 6.9%.
AVNS' Financial Update
The company exited third-quarter 2025 with cash and cash equivalents worth $70.5 million compared with $90.3 million at the end of the second quarter. Total debt at third-quarter 2025-end was $102.8 million compared with $105.1 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter of 2025 totaled $46.5 million compared with $42.8 million in the prior-year period.
Avanos' Guidance
AVNS has raised its 2025 sales outlook while increasing the lower-end of the EPS guidance.
The company has raised its full-year net sales estimate to the range of $690-$700 million versus $665-$685 million previously. The Zacks Consensus Estimate is currently pegged at $684.98 million.
Avanos now anticipates 2025 adjusted EPS between 85 and 95 cents (previously 75 and 95 cents). The Zacks Consensus Estimate is currently pegged at 92 cents.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -17.24% due to these changes.
VGM Scores
Currently, Avanos Medical has a average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for value investors.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Avanos Medical has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Avanos Medical belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, TransMedics (TMDX), has gained 10.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2025.
TransMedics reported revenues of $143.82 million in the last reported quarter, representing a year-over-year change of +32.2%. EPS of $0.66 for the same period compares with $0.12 a year ago.
TransMedics is expected to post earnings of $0.41 per share for the current quarter, representing a year-over-year change of +115.8%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
TransMedics has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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AVANOS MEDICAL, INC. (AVNS): Free Stock Analysis Report TransMedics Group, Inc. (TMDX): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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