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Halyard Health Cut to Strong Sell on Weak Q2, Slashed View

On Sep 25, Zacks Investment Research downgraded Halyard Health Inc HYH to a Zacks Rank #5 (Strong Sell). The downgrade reflects unimpressive second-quarter 2015 results, slashed guidance and growing near-term headwinds.

Why the Downgrade?

Halyard Health, the former healthcare division of Kimberly-Clark KMB , which was spun off in late October, started trading as an independent company since Nov 3, 2014, on NYSE. Halyard Health's products primarily focus on preventing as well as managing infections and post-operative pain.

The first half of 2015 has been disappointing for the company as both earnings and revenues were affected by unfavorable foreign exchange, distributor inventory reductions in North America (in the S&IP segment) and stiff competition.

In the second quarter of 2015 (ended June 30), adjusted EPS of 52 cents plunged from $1.06 reported in the year-ago quarter. Net sales declined 6% (down 3% at constant currency) on a year-over-year basis to $389 million.

Owing to near-term headwinds in the S&IP segment, Halyard Health lowered its full-year 2015 guidance. Net sales, on a constant currency basis, are expected to decline 1% to 3% (earlier guidance was growth in the range of flat to 2%). Adjusted EPS is anticipated in the band of $1.90 to $2.10 (down from $2.30-$2.50).

Net sales from S&IP, on a constant currency basis, are expected to decline 3% to 5%. Net sales at the Medical Devices segment, on a constant currency basis, are projected to increase 2%-4%.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2015 contracted almost 12.1% (28 cents) to $2.03 per share over the last 60 days. Similarly, for fiscal 2016, the Zacks Consensus Estimate declined 12.2% (30 cents) to stand at $2.16 per share over the same time frame.

Stocks to Consider

One may consider some better-ranked players in the industry like Merit Medical MMSI and Laboratory Corp LH , with a Zacks Rank #2 (Buy).

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KIMBERLY CLARK (KMB): Free Stock Analysis Report

LABORATORY CP (LH): Free Stock Analysis Report

MERIT MEDICAL (MMSI): Free Stock Analysis Report

HALYARD HEALTH (HYH): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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