It has been about a month since the last earnings report for Charles River Laboratories (CRL) . Shares have lost about 5.3% in that time frame, underperforming the S&P 500. Will the recent negative trend continue leading up to its next earnings release, or is Charles River due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Charles River Q2 Earnings Bea ...

I I F ■ F Matteo Colombo Investment update Following my last publication on Charles River Laboratories International, Inc. (NYSE:CRL) in May, the business is -3% to the downside and after its Q2 FY'24 numbers, I've revised my rating on the company to a hold for reasons outlined in this note. Critically, my view in May was formed on a potential turnaround in the economic situation of the business, along with operating growth that required very little incremental capital to produce. On reflection, this may ha ...

NEW YORK, Aug. 13, 2024 (GLOBE NEWSWIRE) -- Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against Charles River Laboratories International, Inc. (NYSE: CRL) on behalf of long-term stockholders following a class action complaint that was filed against Charles River on May 19, 2023 with a Class Period from May 5, 2020 to February 21, 2023. Our investigation concerns whether the board of directors of Charles River have breached their fiducia ...

Core Insights - Charles River Laboratories (CRL) reported total revenue of $1.03 billion for the quarter ending June 2024, a decrease of 3.2% year-over-year [4] - The company's international revenue performance is crucial for understanding its financial resilience and growth prospects [1][2] International Revenue Analysis - Asia Pacific contributed $50.39 million, accounting for 4.9% of total revenue, with a surprise decline of -10.07% compared to expectations of $56.03 million [5] - Europe generated $271.38 million, making up 26.5% of total revenue, with a surprise of -4.12% against the projected $283.04 million [6] - Canada reported $125.24 million in revenue, representing 12.2% of total revenue, exceeding expectations by +19.89% [7] - Other International markets, including Brazil and Israel, contributed $7.68 million, accounting for 0.8% of total revenue, with a significant surprise of +220.08% [8] Future Projections - Analysts project total revenue of $1.04 billion for the current fiscal quarter, reflecting a 1.6% increase year-over-year, with expected contributions from Asia Pacific (5%), Europe (27.2%), Canada (11.1%), and Other International (0.3%) [9] - For the full year, total revenue is anticipated to be $4.11 billion, a decrease of 0.5% compared to last year, with specific contributions from Asia Pacific (5.2%), Europe (27.7%), Canada (11%), and Other International (0.7%) [10] Conclusion - The reliance on international markets presents both opportunities and challenges for Charles River, making the tracking of international revenue trends essential for future projections [11]

Core Viewpoint - The biopharma market is experiencing a slower recovery than expected, particularly affecting small and mid-sized biotechnology customers, leading to a downgrade in full-year guidance for Charles River Laboratories (CRL) [2][4][17] Company Performance - CRL's Q2 results showed a 5% year-over-year decline in organic revenue, primarily due to weak end-market demands from small and mid-sized biopharma companies [4][10] - The company has lowered its full-year guidance for both organic revenue and bottom-line growth, with projected revenue growth now between -4.5% to -2.5% compared to a prior estimate of 1.0% to 4.0% [3][10] - The GAAP EPS estimate has been revised down to $5.65 - $5.95 from $7.60 - $8.10 [3] Cost Management Initiatives - CRL's adjusted operating margin expanded by 90 basis points in Q2 despite a 3.2% decline in organic revenue, indicating effective cost-cutting measures [6][10] - The company anticipates generating over $150 million in annualized cost savings from ongoing cost-cutting initiatives, expected to be fully realized by FY25 [8][9] Market Outlook - The biopharma market is expected to remain soft in FY24 due to high interest rates and a tight capital funding environment, with no anticipated recovery before the Federal Reserve cuts interest rates [5][10] - Revenue for CRL is projected to decline by 3% in FY24, with specific segments like Discovery and Safety Assessment expected to see a 6% decline [12][13] Future Projections - For FY25, CRL is expected to recover with an 8% normalized revenue growth, assuming a favorable shift in the interest rate environment [12][13] - The company is projected to expand its margin by 230 basis points in FY25 due to the realization of cost savings [9][13] Valuation - The fair value of CRL's stock is estimated at $220 per share based on discounted cash flow analysis, with a calculated WACC of 9.8% [15][17]

Core Viewpoint - Charles River Laboratories reported a mixed performance in Q2 2024, with adjusted EPS exceeding estimates while revenues declined year over year, leading to a lowered financial outlook for the year [1][11]. Financial Performance - Adjusted EPS for Q2 2024 was $2.80, a 4.1% increase year over year, surpassing the Zacks Consensus Estimate by 17.2% [1] - GAAP EPS declined 7.9% year over year to $1.74 [1] - Total revenues were $1.03 billion, matching the Zacks Consensus Estimate but down 2.8% from the previous year [2] Segment Performance - Research Models and Services (RMS) revenues were $206.4 million, down 1.7% year over year, primarily due to lower revenues from non-human primates in China [4] - Discovery and Safety Assessment (DSA) revenues fell to $627.4 million, a 5.4% decline year over year, attributed to lower revenues in both Discovery Services and Safety Assessment [5] - Manufacturing Solutions revenues increased to $192.3 million, up 3.1% year over year, driven by growth in the CDMO business [6] Margins and Expenses - Gross profit was $353.7 million, down 11.3% year over year, with a gross margin of 34.5%, contracting 317 basis points [7] - Selling, general & administrative expenses decreased 15% year over year to $169.8 million [7] - Adjusted operating income was $183.9 million, reflecting a 7.7% decline from the prior year, with an adjusted operating margin of 17.9% [7] Liquidity and Cash Position - Cash and cash equivalents at the end of Q2 were $179.2 million, down from $327 million at the end of Q1 [8] - Cumulative net cash from operating activities was $323.4 million, an increase from $257.5 million at the end of Q2 2023 [8] 2024 Guidance - The company has lowered its revenue guidance for 2024, now expecting a decrease of 4.5-2.5% compared to earlier growth expectations of 1-4% [9] - Adjusted EPS for 2024 is now projected to be in the range of $9.90-$10.20, down from the previous range of $10.90-$11.40 [10] Market Outlook - Management indicated that demand trends in DSA are expected to decline for global biopharmaceutical clients in the second half of 2024 [12] - The company is focusing on innovation and enhancing its portfolio to adapt to changing industry needs [12]

Financial Data and Key Metrics Changes - Revenue for Q2 2024 was reported at $1.03 billion, reflecting a 3.2% decline on both reported and organic bases compared to the previous year [5][26] - Operating margin increased to 21.3%, up 90 basis points year-over-year, primarily due to lower performance-based bonus compensation accruals [6][30] - Earnings per share rose to $2.80, a 4.1% increase year-over-year, exceeding prior guidance by approximately $0.40 [6][24] Business Segment Data and Key Metrics Changes - DSA segment revenue decreased by 5% on an organic basis to $627.4 million, driven by lower revenue in Discovery Services and Safety Assessment [14][26] - RMS revenue was $206.4 million, a decline of 3.9% on an organic basis, primarily due to lower NHP revenue [17][19] - Manufacturing Solutions segment revenue increased by 3.7% on an organic basis to $192.3 million, with expectations for mid- to high single-digit growth for the year [20][21] Market Data and Key Metrics Changes - Demand from small and midsized biotech clients has stabilized, while demand from global biopharmaceutical clients is expected to deteriorate further [10][11] - The DSA backlog decreased to $2.16 billion from $2.35 billion sequentially, indicating a decline in demand [15] - The overall market environment for RMS is expected to remain stable, with flat to low single-digit growth anticipated [17][29] Company Strategy and Development Direction - The company plans to streamline its cost structure and optimize its global footprint to mitigate the impact of declining demand [7][13] - A stock repurchase program has been reinstated with a new authorization totaling $1 billion, aimed at managing capital allocation [14][28] - The company is focused on enhancing its commercial efforts and leveraging technology to improve sales insights and client engagement [12][28] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns over the rapid deterioration in demand from large pharmaceutical clients, attributing it to cost-cutting measures and pipeline reprioritization [9][38] - The outlook for the second half of the year has been revised downward, with expectations of a low to mid-single-digit organic revenue decline [10][26] - Management remains cautiously optimistic about the recovery in biotech demand, although it is not expected to support revenue improvements in the near term [11][49] Other Important Information - The company expects to generate over $150 million in annualized cost savings from restructuring initiatives, with $100 million expected to be realized in 2024 [13][27] - Free cash flow for Q2 was strong at $154.1 million, driven by lower capital expenditures and effective working capital management [31][32] Q&A Session Summary Question: What is the rationale for the increased deceleration of demand from global biopharma? - Management noted a rapid and unexpected deterioration in demand, influenced by cost-cutting and restructuring efforts within large pharmaceutical companies [35][36] Question: Is there a market share issue in DSA, or is it primarily macro pressures? - Management believes they are not losing market share and attributes the challenges to broader market shifts rather than internal issues [39][40] Question: Can you quantify the impact of bonus accruals on earnings? - Approximately $20 million in bonus accruals contributed to earnings upside in Q2, with expectations for additional favorability in the second half [42][43] Question: How do you view the pricing dynamics in the current market? - Management indicated that pricing pressures are expected to increase in the second half of the year, with a slight decline anticipated in DSA pricing [62][65] Question: What are the key areas of concern heading into 2025? - Management highlighted ongoing pressures from large pharma pullbacks and potential cooling in biotech funding as significant concerns for the upcoming year [60][61]

Core Insights - Charles River Laboratories shares fell over 12% after the company announced an expected decline in sales for the full fiscal year, shifting from previous growth expectations [2][4] - The company reported second-quarter revenue of $1.03 billion, meeting analyst expectations, while profits were slightly above estimates at $94.08 million, both showing a decline from the previous year [2][3] - The board approved a new $1 billion stock buyback plan, replacing a previous $1.3 billion plan that had approximately $129 million remaining [4] Sales and Earnings Outlook - CEO James Foster indicated that demand is expected to soften in the second half of 2024, leading to a revision in the company's full-year revenue guidance to a decline of 2.5% to 4.5%, compared to earlier expectations of 1% to 4% growth [3] - Earnings per share (EPS) projections were also lowered from $7.60 to $8.10 to a new range of $5.65 to $5.95 [3] Stock Performance - Following the announcement, Charles River shares dropped to $200.98, marking a 12.2% decline on the day and approximately a 15% loss since the beginning of the year [4]

Core Insights - Charles River Laboratories (CRL) reported revenue of $1.03 billion for the quarter ended June 2024, a decrease of 3.2% year-over-year, while EPS increased to $2.80 from $2.69 in the previous year [1] - The revenue matched the Zacks Consensus Estimate, resulting in a slight surprise of +0.09%, while the EPS exceeded expectations by +17.15% [1] Revenue Breakdown - Research Models and Services generated $206.39 million, surpassing the average estimate of $200.58 million, but reflecting a year-over-year decline of -1.7% [3] - Discovery and Safety Assessment revenues were $627.42 million, below the average estimate of $637.52 million, marking a -5.4% change year-over-year [4] - Manufacturing Support revenues matched estimates at $192.31 million, showing a year-over-year increase of +3.1% [5] - Services revenues totaled $842.90 million, slightly below the average estimate of $845.77 million, with a year-over-year decline of -3.7% [6] - Products revenues were $183.22 million, exceeding the estimate of $182.16 million, but reflecting a -1% change from the previous year [7] Operating Income Analysis - Non-GAAP operating income for Research Models and Services was $47.70 million, below the average estimate of $48.60 million [8] - Non-GAAP operating income for Discovery and Safety Assessment was $170.14 million, exceeding the estimate of $156.36 million [8] - Non-GAAP operating income for Manufacturing Support was $51.20 million, slightly above the average estimate of $50.39 million [8] - Unallocated Corporate Overhead showed a loss of -$53.90 million, better than the estimate of -$62.33 million [9] - Operating income for Research Models and Services was $29.95 million, below the estimate of $43.59 million [9] - Operating income for Discovery and Safety Assessment was $138.38 million, exceeding the estimate of $131.44 million [9] - Manufacturing Support operating income was $37.23 million, below the estimate of $42.15 million [10] Stock Performance - Charles River's shares have returned +13.4% over the past month, contrasting with the Zacks S&P 500 composite's -5.9% change [10] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [10]

Charles River Laboratories (CRL) came out with quarterly earnings of $2.80 per share, beating the Zacks Consensus Estimate of $2.39 per share. This compares to earnings of $2.69 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 17.15%. A quarter ago, it was expected that this medical research equipment and services provider would post earnings of $2.05 per share when it actually produced earnings of $2.27, delivering a surprise ...