AVNS Stock Gains Post Q1 Earnings & Revenue Beat, Gross Margin Down

Avanos Medical, Inc. AVNS reported first-quarter 2025 adjusted earnings per share (EPS) from continuing operations of 26 cents, up 18.2% year over year. The bottom line surpassed the Zacks Consensus Estimate by 36.8%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

GAAP EPS from continuing operations in the quarter under review was 14 cents compared with the year-ago period’s EPS of a penny.

Avanos’ Revenues

Revenues grossed $167.5 million in the reported quarter, up 0.8% year over year. The metric beat the Zacks Consensus Estimate by 2%.

Organic sales were up 2.8% year over year.

The top line was boosted by continued strong performance in AVNS’ Specialty Nutrition Systems (SNS) segment, partially offset by weakness in the Pain Management and Recovery (PM&R) segment.

Shares of the company gained nearly 5.4% at yesterday’s close.

AVNS’ Segmental Analysis

Avanos generates revenues from three segments — SNS, PM&R and Corporate and Other.

PM&R segment’s revenues in the first quarter of 2025 were $56.2 million, down 0.2% year over year. This figure compares to our first-quarter projection of $71 million.

The PM&R segment’s volume growth was offset by unfavorable currency effects and the effects of certain revenue streams that Avanos strategically decided not to pursue this year. Net sales of radiofrequency ablation (RFA) products grew 8.2% year over year to $31.7 million, reflecting momentum in RFA generator sales. This resulted in more procedures, especially in the ESENTEC and TRIDENT product lines. Net sales in the surgical pain and recovery unit declined 9.3% year over year to $24.5 million, in line with AVNS’ expectations.

SNS segment’s revenues in the first quarter of 2025 were $101.1 million, up 6.9% year over year. The segment recorded an 8.7% volume growth driven by continued strong demand across both Avanos’ enteral feeding and neonate solutions categories.

Enteral feeding unit’s revenues were $74.5 million in the first quarter of 2025 (up 6.4% year over year), while Neonate solutions unit’s revenues were $26.6 million (up 8.1% year over year).

Corporate and Other segment’s revenues were $10.2 million, down 32.9% year over year. The segment includes the Hyaluronic Acid (HA) injections and intravenous infusion product lines, which declined primarily due to continued pricing pressures in Avanos’ three- and five-shot HA categories.

Avanos Medical, Inc. Price, Consensus and EPS Surprise

Avanos Medical, Inc. price-consensus-eps-surprise-chart | Avanos Medical, Inc. Quote

Avanos’ Margin Analysis

In the quarter under review, Avanos’ gross profit declined 5.3% year over year to $89.8 million. The gross margin contracted 346 basis points (bps) to 53.6%. We had projected a gross margin of 56.4% for the first quarter.

Selling and general expenses decreased 9.4% year over year to $75.7 million. Research and development expenses decreased 22.9% year over year to $5.4 million. Adjusted operating expenses of $81.1 million decreased 10.5% year over year.

Adjusted operating profit totaled $8.7 million, reflecting a 107.1% increase from the prior-year quarter. The adjusted operating margin in the first quarter expanded 267 bps to 5.2%.

AVNS’ Financial Update

The company exited first-quarter 2025 with cash and cash equivalents worth $97 million compared with $107.7 million at the end of 2024. Total debt at first-quarter 2025-end was $107.4 million compared with $134.7 million at 2024-end.

Net cash provided by operating activities at the end of first-quarter 2025 totaled $25.7 million against net cash used in operating activities of $8 million in the prior-year period.

Avanos’ Guidance

AVNS has revised its 2025 outlook.

The company continues to estimate its net sales for the full year in the range of $665 million to $685 million. The Zacks Consensus Estimate currently stands at $677.4 million.

Avanos now anticipates 2025 adjusted EPS between 75 and 95 cents, lowered from the prior outlook of $1.05 and $1.25. The Zacks Consensus Estimate is currently pegged at $1.16.

Our Take

Avanos ended the first quarter of 2025 with better-than-expected results and strong top-and-bottom-line growth. The strength in the SNS segment and RFA product sales of the PM&R segment in the quarter was encouraging. The expansion of the adjusted operating margin bodes well for the stock.

Yet, Avanos’ weakness in the PM&R segment and the surgical pain and recovery unit of the same segment was discouraging. Weaknesses in HA injections and intravenous infusion product lines were also disappointing. The contraction of the gross margin does not bode well. Management’s expectation of a softer second quarter for the SNS segment, primarily due to distributor order timing tied to the company’s international Go-Direct transition, raise our apprehension. On the earnings call, management sounded cautious about the uncertainty on the ultimate impact of tariffs on AVNS’ profitability and cash flow. This also raises concerns.

AVNS’ Zacks Rank and Stocks to Consider

Avanos currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are CVS Health Corporation CVS, Integer Holdings Corporation ITGR and Boston Scientific Corporation BSX.

CVS Health, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2025 adjusted EPS of $2.25, beating the Zacks Consensus Estimate by 31.6%. Revenues of $94.59 billion outpaced the consensus mark by 1.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CVS Health has a long-term estimated growth rate of 11.4%. CVS’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.1%.

Integer Holdings reported first-quarter 2025 adjusted EPS of $1.31, beating the Zacks Consensus Estimate by 3.2%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%. It currently sports a Zacks Rank #1.

Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.

Boston Scientific reported first-quarter 2025 adjusted EPS of 75 cents, beating the Zacks Consensus Estimate by 11.9%. Revenues of $4.66 billion surpassed the Zacks Consensus Estimate by 2.3%. It currently carries a Zacks Rank #2.

Boston Scientific has a long-term estimated growth rate of 13.3%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.8%.

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This article originally published on Zacks Investment Research (zacks.com).

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