Why Roth Capital Reiterated A Hold On China Cord Blood Corp After 'Noisy' Earnings

On August 19, China Cord Blood Corporation CO, China's top umbilical cord blood storage services provider, released its preliminary unaudited financial results for the fiscal first quarter 2016, which ended on June 30, 2015. Correspondingly, shares of CO plunged by 2.65% to $6.97 on August 21.

The release of the results was preceded by positive movements at the beginning of August as the stock soared 14% to $6.69. Shares rose following a buyout bid by Nanjing Xinjiekou Department Store Co. that exceeded the one that CO's biggest shareholder made in April by 72 percent. Following this bid, Jefferies & Co. analyst Brian Tanquilut reiterated a Buy rating on August 7 on the stock with a price target of $11.00.

Overall, Brian Tanquilut has a 58% success rate recommending stocks and a +9.2% average return per recommendation when measured over a one-year horizon and no benchmark. He has rated CO three times since 2013, earning a 67% success rate recommending the stock and a +31.5% average return per recommendation.

In an analysis posted on August 21, Scott Henry of Roth Capital Partners described the 1Q16 results as "noisy" in light of the positive and negative aspects of CO's performance during this period. Notable highlights of the first quarter of fiscal 2016 were that revenues increased by 7.8% to $26.7 million, and gross profit increased by 4.2% to $20.8 million. New subscribers and subscriber base were 16,090 and 457,449, respectively. At the same time, the company exhibited higher spending and higher taxes at 53%.

In light of these results, Scott Henry maintained a Neutral rating on the stock while increasing his price target to $7.25 from $6.75. Roth Capital previously downgraded CO to neutral from Buy in June in light of the company's ongoing deliberation over privatization.

Henry highlighted that CO exceeded his expectations in terms of new subscribers, total revenues, process revenues, and storage revenues. However, he qualified that the higher tax rate balanced out the revenue upside. His conclusion was that the results were within his range of expectations. Henry increased the spending and tax rate for CO for the remainder of FY2016, thus reducing EPS by -$0.05.

On average, Scott Henry has an overall success rate of 51% recommending stocks and an average return of +21.3% when measured over a one-year horizon and no benchmark. The analyst has rated CO a total of five times since 2009, earning a 67% success rate recommending the company and a +4.2% return per CO recommendation.

Out of two analysts rating CO polled by TipRanks within the past three months, one is bullish and one is neutral. The average 12-month price target for CO is $9.13, marking a 38.75% upside from where the stock last closed.