On Jan 7, 2015, Zacks Investment Research upgraded Halyard Health Inc (HYH) to a Zacks Rank #1 (Strong Buy). The upgrade was primarily due to positive estimate revisions.
Why the Upgrade?
Halyard Health, the former healthcare division of Kimberly-Clark (KMB), was spun off in late October and started trading as an independent company since Nov 3, 2014 on NYSE. Halyard’s products primarily focus on preventing healthcare related infections and post-operative pain management.
Halyard’s infection preventive products have generated strong demand in the U.S. owing to the outbreak of Ebola, which was first diagnosed in the country in late September.
In Mar 2014, the first case was notified in West Africa – starting in Guinea and then spreading to Sierra Leone and Liberia. To date, at least four patients have been afflicted with Ebola in the U.S.
The virus spreads through direct contact with the blood, secretions, organs or other body fluids of infected people, and with surfaces and materials contaminated with these fluids. Hence, it is absolutely necessary for healthcare workers treating Ebola patients to take precautions in order to avoid contamination.
Per World Health Organization (WHO) guidance, Ebola care-givers should wear face protection (a face shield or a medical mask and goggles), a clean, non-sterile long-sleeved gown, and gloves (sterile gloves for some procedures), when in close contact (within 1 meter) with the patient.
In the nine months ended Sep 30, 2014, the company reported sales of $1.23 billion. We believe that growing demand for the protective gear will boost Halyard’s top-line growth in the long run.
Estimate Revisions
The Zacks Consensus Estimate for fiscal 2014 increased 2.4% (7 cents) to $3.01 per share over the last seven days. Similarly, for fiscal 2015, the Zacks Consensus Estimate surged 27.2% (56 cents) to $2.62 per share over the same time frame.
Other Stocks to Consider
One may also consider some other players in the industry that look attractive at current levels. These include Bio-Reference Laboratories (BRLI) and Synergetics USA (SURG). Both the stocks carry the same Zacks Rank as Halyard Health.
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