Charles River Sees Limited Impact From NIH Cuts, Tariffs, Drug Pricing

Core Insights - Charles River Laboratories International Inc. reported lower stock trading following the release of its second-quarter 2025 earnings, amid ongoing scrutiny regarding animal endangerment allegations [1][2]. Financial Performance - The company reported revenue of $1.03 billion, a marginal increase of 0.6% year-over-year, surpassing the consensus estimate of $984.65 million [5]. - The impact of foreign currency translation increased reported revenue by 1.2%, while organic revenue declined by 0.5% [5]. - Operating margin decreased to 9.7% from 14.8% in the second quarter of 2024, with net income at $52.3 million, or $1.06 per share, down from $90.0 million, or $1.74 per diluted share [5]. - Adjusted operating margin increased to 22.1% from 21.3%, with adjusted earnings at $3.12 per share, up 11.4%, exceeding the consensus estimate of $2.50 [5]. Segment Performance - Revenue for the Research Models and Services (RMS) segment was $213.3 million, an increase of 3.3% year-over-year, with organic revenue up by 2.3% [5]. - Discovery and Safety Assessment (DSA) segment revenue was $618 million, down 1.5%, with organic revenue decreasing by 2.4% due to lower sales volumes [5]. - Manufacturing Solutions revenue reached $200.8 million, up 4.4%, with organic revenue increasing by 2.9% [5]. Outlook and Market Conditions - The company raised its fiscal year 2025 adjusted earnings outlook from $9.30-$9.80 to $9.90-$10.30, compared to the consensus estimate of $9.60 [3]. - The company expects 2025 revenue to decline between (2.5)% and (0.5)%, a revision from the prior range of 5.5%-3.5% [3]. - The effects of government funding reductions have been minimal, and the company anticipates that the loss of commercial CDMO revenue will reduce the growth rate of manufacturing solutions by less than 500 basis points in 2025 [4]. Regulatory and Legal Context - The U.S. Fish and Wildlife Service cleared the company's shipments from late 2022 and early 2023 as legal, and investigations by the U.S. Department of Justice have been closed [2]. - The company faced allegations from PETA regarding misleading investors about its sales and purchases of long-tailed macaques, but recent legal developments have cleared the company of these allegations [1][2]. Market Reaction - Following the earnings report, CRL stock was down 4.82% at $159.42 [6].