Why Is Avanos Medical (AVNS) Down 0.5% Since Last Earnings Report?

Core Viewpoint - Avanos Medical reported a mixed performance in its Q3 2025 earnings, with adjusted EPS beating estimates but showing a significant year-over-year decline, while revenues increased modestly, driven by growth in its Specialty Nutrition Systems and Pain Management segments [2][3][14]. Financial Performance - Adjusted EPS for Q3 2025 was 22 cents, down 38.9% year over year, but exceeded the Zacks Consensus Estimate of 16 cents by 37.5% [2] - Revenues reached $177.8 million, reflecting a 4.3% increase year over year and surpassing the Zacks Consensus Estimate by 6.9% [3] - GAAP loss per share was 3 cents compared to an EPS of 12 cents in the prior year [2] Segment Analysis - The Pain Management and Recovery (PM&R) segment generated revenues of $59 million, up 2.1% year over year, slightly above projections [5] - The Specialty Nutrition Systems (SNS) segment reported revenues of $114 million, a 16.1% increase year over year, driven by strong demand in enteral feeding and neonate solutions [7] - The Corporate and Other segment's revenues fell to $4.8 million, down 66.7% year over year, impacted by the divestiture of the Hyaluronic Acid product line [8][9] Margin and Expense Analysis - Adjusted gross profit declined 4.7% year over year to $97.4 million, with adjusted gross margin contracting 390 basis points to 55.7% [11] - Selling and general expenses increased by 3.2% year over year to $83.5 million, while research and development expenses decreased by 7.9% to $5.8 million [11] Financial Position - Cash and cash equivalents at the end of Q3 2025 were $70.5 million, down from $90.3 million at the end of Q2 2025 [13] - Total debt decreased to $102.8 million from $105.1 million in the previous quarter [13] Guidance and Outlook - The company raised its 2025 sales outlook to a range of $690-$700 million, up from $665-$685 million previously [14] - Adjusted EPS guidance for 2025 was increased to between 85 and 95 cents, compared to the previous range of 75 to 95 cents [14] Industry Comparison - Avanos Medical's stock has underperformed, declining 33.1% year-to-date, while the broader S&P 500 has increased by 16.7% [4] - In contrast, TransMedics, a competitor in the same industry, reported a 32.2% year-over-year revenue increase and a significant EPS growth, indicating stronger performance within the sector [18][19]