Charles River (CRL) Q2 Earnings Beat Estimates, 2024 View Down

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]