What: After reporting disappointing second quarter financial results, shares in Halyard Health (NYSE:AVNS) fell 10% earlier today.

So what: The medical supplier reports that revenue in the second quarter totaled $389.3 million, down 5.9% year-over-year and that EPS in the quarter was $0.52. Analysts were hoping for sales of $403.35 million and EPS of $0.53.

After adjusting for currency exchange, sales fell 3% year-over-year in the quarter, and adjusted EPS of $0.52 was significantly below the $1.06 reported a year ago.

The company blamed its lackluster performance on falling demand and lower prices at its surgical and infection protection (or S&IP) business and higher expenses.

Sales of S&IP products fell 11% from last year to $255 million in the second quarter as facilities ordered fewer surgical gowns, exam gloves, and protective apparel than a year ago, when demand increased in the wake of a growing number of Ebola cases. 

Source: Halyard Health

Although S&IP sales declined, Halyard Health did grow its medical device sales by 5% a year ago to $127 million, and its medical device segment profit improved to $33 million last quarter from $25 million a year ago.

Now what: Lower results for S&IP products have Halyard Health reducing its full year sales growth outlook to a decline of between 1% and 3%. The company believes its full year adjusted EPS will be between $1.90 and $2.10 in 2015.

Exiting the first quarter, Halyard Health was guiding for full year sales growth of 2% and adjusted EPS of at least $2.30, so this new outlook is discouraging. Having said that, Halyard Health operates in a relatively inelastic industry, is profitable, and trades at an arguably reasonable valuation of 1.12 times sales and 14.4 times next year's earnings. For those reasons, it may be worth considering shares once we anniversary the spike in demand tied to Ebola in 2014.

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