Avanos Medical Navigates Growth Amid Tariff Challenges

Avanos Medical, Inc. ((AVNS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Avanos Medical’s recent earnings call revealed a mixed sentiment, highlighting robust performance in key areas such as Specialty Nutrition Systems and Pain Management, while also acknowledging challenges posed by tariffs and declining product lines. The company maintains a strong financial position, but the impact of tariffs and other factors are expected to affect future earnings.

Strong Performance of Specialty Nutrition Systems

The Specialty Nutrition Systems segment stood out with impressive results, achieving nearly 9% organic growth compared to the previous year. This performance reaffirms Avanos’s leading position in long-term, short-term, and neonatal enteral feeding markets, showcasing the company’s ability to outperform market expectations.

Positive Growth in Pain Management and Recovery Segment

Avanos’s Pain Management and Recovery segment also demonstrated positive momentum, with the Radio Frequency Ablation business experiencing near double-digit growth. This growth was supported by increased productivity and international expansion, benefiting from favorable reimbursement conditions.

Solid Financial Position

Avanos reported a solid financial standing with $97 million in cash and $107 million in debt as of March 31. The company generated $19 million in free cash flow during the quarter and anticipates $65 million for the year, excluding tariffs. This financial stability provides a foundation for future strategic initiatives.

Impact of Tariffs on Earnings

Despite strong performances in certain segments, Avanos faces significant challenges due to tariffs. The company expects approximately $15 million in additional tariff-related manufacturing costs for the year, primarily affecting goods originating from China. These costs are anticipated to have a substantial impact on earnings.

Decline in Hyaluronic Acid and Intravenous Infusion Product Lines

The earnings call also highlighted a concerning decline in the Hyaluronic Acid and Intravenous Infusion product lines, which saw a combined decrease of over 30% in the first quarter. This decline is attributed to ongoing pricing pressures, posing a challenge for Avanos moving forward.

Leadership Change Costs

Avanos will incur one-time costs related to executive leadership changes in the second quarter, which were not included in the initial guidance. These unexpected expenses add another layer of complexity to the company’s financial outlook.

Forward-Looking Guidance

Avanos provided comprehensive guidance for the future, reporting approximately $168 million in sales for the quarter with a 2.8% year-over-year organic sales growth. The company adjusted its earnings per share estimate for 2025 to a range of $0.75 to $0.95, factoring in the projected $15 million tariff-related costs. Despite these challenges, Avanos remains focused on maintaining its strong balance sheet and achieving its financial goals.

In summary, Avanos Medical’s earnings call painted a picture of a company excelling in key areas while grappling with external pressures such as tariffs and declining product lines. The company’s strong financial position and strategic growth in Specialty Nutrition Systems and Pain Management provide a solid foundation, but challenges remain on the horizon. Investors will be keenly watching how Avanos navigates these hurdles in the coming quarters.