On Wednesday, Stifel analyst Rick Wise revised the price target for Avanos Medical (NYSE:AVNS) to $20.00, down from the previous target of $24.00, while retaining a Hold rating on the stock. The adjustment follows Avanos Medical's announcement of CEO Joe Woody's retirement and the naming of Michael Greiner as interim CEO. Concurrently, the company disclosed its third-quarter earnings, which missed revenue expectations by approximately $5 million.
The shortfall in revenue for the third quarter was attributed to underperformance in the Pain Management sector, which constitutes around 42% of sales and reported a 5.4% year-over-year decline. The Surgical Pain segment, particularly impacted by the ON-Q product line, saw an 11.1% decrease year-over-year. Avanos faced supply issues with ON-Q earlier in the quarter, which have since been resolved, but led to a loss of non-priority customers and a $3 million revenue gap.
In contrast, the Digestive Health division, representing about 58% of sales, reported a 3.4% year-over-year increase and achieved nearly 6% organic growth year-over-year, bolstered by strong double-digit expansion in NeoMed. Despite the disappointing overall revenue figures, Avanos managed to maintain its third-quarter operating, pre-tax, and net income levels close to projections.
Efforts to optimize selling, general and administrative (SG&A) expenses and a Canadian Customs duty refund helped Avanos control costs amidst the revenue and gross margin pressures. The company's ability to keep third-quarter net income stable, in spite of the nearly $5 million revenue shortfall compared to expectations, was highlighted by the analyst.
InvestingPro Insights
To complement the analysis of Avanos Medical's recent performance and leadership changes, InvestingPro data offers additional financial context. Despite the recent revenue challenges, Avanos Medical maintains a market capitalization of $811.86 million. The company's P/E Ratio (Adjusted) for the last twelve months as of Q2 2024 stands at 23.5, suggesting a moderate valuation relative to earnings.
An InvestingPro Tip indicates that Avanos Medical's management has been aggressively buying back shares, which could signal confidence in the company's future prospects despite recent setbacks. This aligns with the company's efforts to maintain shareholder value in the face of revenue pressures.
Another relevant InvestingPro Tip notes that Avanos Medical is trading at a low P/E ratio relative to near-term earnings growth. This could be of interest to investors considering the company's ability to maintain net income levels despite revenue challenges, as mentioned in the article.
For readers seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Avanos Medical, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.