The vitamin maker was knocked by poor sales growth in China, tipped to remain weak.

Blackmores, Woolworths and Carsales.com each suffered share price falls of more than 5 per cent in the 24 hours following their announcement of their first-half earnings, Morningstar research shows.

These results are tracked as part of Morningstar's Initial Market Reaction metric. Measuring the share price reaction to financial results, it forms part of Morningstar's Earnings Season Insights report on first-half reporting, available on morningstar.com.au.

Bitter pills for Blackmores

Shares in vitamin maker Blackmores (ASX: BKL) hit an 18-month low when management reported its sales into China had fallen more than 11 per cent in the first-half of fiscal 2019.

The negative investor response was also driven by the morose outlook of Blackmores management. It got rid of its chief executive Richard Henfrey, saying the company was undergoing a “transformation”, and said the second half of the year was unlikely to be any better than the first.

Blackmores shares were down by 24.85 per cent to $92.68 at market close on the day the result was announced. At the end of December 2015, the stock was trading at $217.

Morningstar downgraded its fair value estimate for the narrow-moated Blackmores to $105 in the wake of the result, from $135.

Morningstar senior equity analyst Adrian Atkins says the decline in China sales reflects general weakness in Chinese consumer sentiment, as well as changes in the way Blackmores distributes its products.

"Management … has pulled back on the number of export partners in the half, due to heightened credit risk.

"Costs were higher because of rebates relating to clearance of ageing stock and [changes to product distribution]," Atkins said.

On the upside, he noted the company's debt levels remained "conservative" and should support further debt-funded organic expansion and acquisitions, and support its high dividend payout ratio.

Though the company's revenue from China declined, other parts of Asia reported strong sales, which were up 67 per cent, 39 per cent and 150 per cent in Korea, Hong Kong and Taiwan.

Woolies margins fail to fill the trolley

Woolworths (ASX: WOW). also delivered a weaker than expected first-half result. Its earnings before interest and tax margins rose by just 8 basis points year-on-year.

At first glance, Morningstar head of equity research Peter Warnes says investors might have expected Woolworths' share price to hold up better, given Wesfarmers' (ASX: WES) share price rose 7 per cent on the day it posted results.

"But that was more due to the special dividend Wesfarmers' management announced," he says.

By contrast, Woolworths' share price fell as much as 6.5 per cent in early trade, as the negatives for investors seemed to outweigh confirmation that up to $1.7 billion from the sale of its petrol stations would be returned to shareholders.

Morningstar equity analyst Johannes Faul expects this number will worsen, possibly even turning negative in the second half.

"Higher wages are coming through, and all of their businesses are going backwards – Big W is still loss-making and will remain so this year," Faul says.

While Faul maintains his view that Woolworths is a good defensive stock, he believes it is considerably overpriced at current levels – something the market is now beginning to realise.

His fair value estimate for the narrow-moat company is unchanged at $24.50, reflecting his view that long-term forecasts remain accurate.

Carsales dented but not smashed

Carsales.com (ASX: CAR), which also holds a narrow moat, reported a weak result for the first half fiscal 2019. 

Its share price fall as much as 9 per cent on the day results were announced and closed down 4 per cent.

Net profit for the half was down 82 per cent, largely due to an anticipated $48 million write-down of its Stratton Finance division.

However, this was largely expected and was already reflected in Morningstar's modelling, says equity analyst Gareth James.

"But it doesn't affect cashflows; it's just merely a reflection of their expectation for future profits from that business … it's not a cash impact," James says.

James has left his fair value estimate at $14.50 a share, and still regards the company as undervalued. It was trading at $11.70 following the result on 14 February, and was priced at $12.65 at 3pm yesterday.

"We think the market valuation is overlooking three key positive attributes of the company currently," he says.

These standouts include the strong international portfolio, which James says is "growing nicely and as expected".

He also calls out its Australian finance business, supported by Carsales' competitive position in automotive classified advertising, and tyresales.com.

"And third, the strength of the competitive position, and associated network effect, in the core online automotive classified advertising business should not be underestimated," James says.

He doesn’t believe Carsales.com faces structural problems and considers any weakness to be cyclical and fixable.