Avanos Medical (NYSE: AVNS) reported fourth‑quarter 2025 results on February 24 2026, posting net sales of $180.9 million—up 0.7% from $179.6 million a year earlier—and earnings per share of $0.29, a $0.04 or 16% beat over the consensus estimate of $0.25. Operating profit rose to $2.5 million, reflecting modest margin improvement amid a broader decline in adjusted EBITDA from $107.6 million to $86.8 million for the year.
The revenue beat was driven largely by the Specialty Nutrition Systems (SNS) segment, which delivered organic sales growth of 8% in the quarter and 9.2% for the full year. In contrast, the Pain Management and Recovery (PM&R) segment experienced a $77 million goodwill impairment in Q2, a one‑time charge that reduced consolidated earnings for the year. The company’s net sales growth, while modest, was supported by strong demand in SNS and offset by headwinds in legacy product lines.
Margin dynamics were mixed. Operating profit improved sequentially, but adjusted gross margin contracted from 54.8% in Q4 2024 to 53.4% in Q4 2025, and adjusted EBITDA fell, indicating pressure on profitability. The company attributes the margin compression to higher input costs and the impact of the goodwill impairment, while noting that cost‑management initiatives are beginning to lift free cash flow, which fell to $21.3 million from $53.1 million a year earlier.
Management raised full‑year 2026 guidance, projecting net sales of $700 million to $720 million—slightly above the $710 million consensus estimate—and adjusted diluted EPS of $0.90 to $1.10, up from the prior $0.75–$0.95 range. The guidance reflects confidence in sustaining momentum in SNS and the expected benefits of the company’s transformation plan, which aims to deliver $15 million to $20 million in incremental annualized savings by the end of 2026.
The company’s transformation plan focuses on tariff mitigation, cost‑management, and portfolio realignment, including the divestiture of its HA product line in July 2025. These initiatives are intended to strengthen high‑margin niche markets and improve operating leverage. Management noted, "I'm very pleased with our fourth quarter and full-year results, which demonstrate meaningful progress on our strategic priorities. Our organic growth remains healthy and positions us well for 2026. Our tariff mitigation efforts are on track, and we're beginning to see the impact of our cost management initiatives. I'm proud of our team's focus and commitment."
Investors reacted negatively to the results, citing concerns over the company’s forward guidance, margin compression, the decline in free cash flow, ongoing tariff impacts, and the goodwill impairment in PM&R. The market’s response underscores the importance of sustained profitability and the perceived risk of the company’s restructuring efforts.
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