Kendle shares fall as 1Q profit misses Wall Street forecast
NEW YORK—Shares of Kendle International Inc. fell 7 percent Thursday, after the clinical research company missed Wall Street's first-quarter profit forecast and a Goldman Sachs analyst reaffirmed a "Sell" rating on the stock.
Shares of the Cincinnati-based company fell $2.53 to $38.05 in afternoon trading. While Kendle's quarterly profit rose 34 percent on rising revenue to $5.6 million, or 38 cents per share, analysts had expected earnings per share of 47 cents.
Goldman Sachs analyst Randall Stanicky said Kendle's revenue and new business wins in the quarter were good, against a strong demand backdrop for clinical research organization services. However, he sees margins continuing to be pressured by higher selling and administrative costs, with spending around infrastructure likely to create challenges to the company's current profitability targets.
He maintained a "Sell" rating and cut his price target to $40 from $46. He also lowered his profit estimates for fiscal 2008 through 2010 to reflect the lower-than-expected quarterly earnings and more moderate margin assumptions.
But Robert W. Baird analyst Eric Coldwell said Kendle shares are just too inexpensive to walk away now.
"Had management simply foreshadowed Q1's extraordinary, concentrated and unexpected costs, we believe the market would be pleased with sales upside, 33 percent earnings per share growth, solid bookings and guidance for substantial EPS improvement ahead," Coldwell wrote in a note to clients, maintaining an "Outperform" rating and $50 price target on the stock.
He said some shareholders are "rightly upset" that substantial insider selling occurred through trading plans initiated in March when management expected a material miss of analyst estimate. But he thinks Kendle is a truly global player with strong business development performance and increased capture of large late-stage global trials, and sees the stock as attractive since CROs are largely insulated from economic woes, raw materials and commodity costs, and shifting politics.
