Charles River Laboratories International, Inc. CRL reported third-quarter 2024 adjusted earnings per share (EPS) of $2.59, which declined 4.8% year over year. The figure, however, surpassed the Zacks Consensus Estimate by 6.6%.
On a GAAP basis, earnings declined 21.3% year over year to $1.33 per share.
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Revenues
Revenues totaled $1.01 billion, beating the Zacks Consensus Estimate by 3.4%. However, the top line declined 1.6% from the year-ago quarter’s level (down 2.7% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Segments in Detail
The company reports through three segments — Research Models and Services (“RMS”), Discovery and Safety Assessment (“DSA”) and Manufacturing Solutions.
RMS’ revenues of $197.8 million were up 5.9% year over year (up 0.6% organically). The organic rise in revenues was primarily driven by higher sales of small research models in all geographic regions on higher pricing. This was largely offset by a revenue decline for research model services, particularly in the Insourcing Solutions business. Our model estimated RMS business revenues to be $189.2 million in the third quarter.
Charles River Laboratories International, Inc. Price, Consensus and EPS Surprise
Charles River Laboratories International, Inc. Price, Consensus and EPS Surprise
Charles River Laboratories International, Inc. price-consensus-eps-surprise-chart | Charles River Laboratories International, Inc. Quote
DSA’s revenues of $615.1 million fell 7.4% year over year (down 7.4% organically as well). The organic decline in revenues can be attributed to lower sales volume in both the Discovery Services and Safety Assessment businesses. Our model projected revenues of $597.6 million for this segment.
Manufacturing Solutions’ revenues totaled $196.9 million, up 12% year over year (up 11.8% organically). Organic revenue growth reflected higher revenues across all segments. For the third quarter, our model projected revenues to be $189 million.
Margins
The gross profit in the reported quarter was $349 million, down 3.5% from the prior-year quarter’s level. The gross margin of 34.6% contracted 68 basis points (bps) year over year despite a 0.6% fall in the total cost of the company.
Selling, general & administrative expenses rose 13.1% year over year to $199.2 million. Adjusted operating income totaled $149.8 million, reflecting a 19.3% decline from the prior-year quarter’s level. The adjusted operating margin contracted 326 bps to 14.8%.
Liquidity and Cash Position
Charles River exited the third quarter with cash and cash equivalents of $210.2 million, compared with $179.2 million at the end of the second quarter.
Cumulative net cash provided by operating activities at the end of the third quarter was $575.2 million compared with $462.9 million at the end of third-quarter 2023.
2024 Guidance
Charles River has tightened its revenue guidance and raised its adjusted EPS guidance for the year.
CRL now expects total revenues to decline in the range of 2.0%-3.0% (earlier guidance for revenue decline was in the band of 2.5%-4.5%) on a reported basis. The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $3.99 billion, implying a reported decline of 3.4%. Organically, revenues are expected to decline in the range of 3-4% (compared with the earlier guidance of 3-5%).
Adjusted EPS for 2024 is now expected to be in the range of $10.10-$10.30 (up from the previously projected range of $9.90-$10.20). The Zacks Consensus Estimate for the metric is pegged at $10.01.
Our Take
Charles River’s third-quarter 2024 earnings and revenues beat estimates. However, the company registered a year-over-year decline in both the top and bottom lines.
RMS and Manufacturing Solutions both registered reported as well as organic revenue growth year over year. However, the company’s largest operating segment, DSA, recorded a significant year-over-year decline due to lower sales volume in Discovery Services and Safety Assessment businesses. Overall, organic revenue growth in the Manufacturing Solutions and RMS segments was more than offset by lower revenues in the DSA segment.
Contraction of both margins does not bode well for the company.
However, management is optimistic about the fact that biotech funding has improved in 2024, and demand appears to be demonstrating early signs of stabilization. Charles River is currently focused on innovation, enhancing its portfolio to support clients from target discovery to non-clinical development and delivering flexible solutions to respond to changing industry and client needs.
Zacks Rank and Key Picks
Charles River currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, ResMed Inc. RMD and Boston Scientific Corporation BSX.
Quest Diagnostics, carrying a Zacks Rank of 2 (Buy), reported third-quarter 2024 adjusted EPS of $2.30, beating the Zacks Consensus Estimate by 1.8%. Revenues of $2.49 billion outpaced the consensus mark by 3.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has a long-term estimated growth rate of 6.5%. DGX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.4%.
ResMed reported first-quarter fiscal 2025 adjusted EPS of $2.20, beating the Zacks Consensus Estimate by 8.4%. Revenues of $1.22 billion surpassed the Zacks Consensus Estimate by 2.9%. It currently carries a Zacks Rank #2.
ResMed has a long-term estimated growth rate of 13.6%. RMD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 6.4%.
Boston Scientific reported third-quarter 2024 adjusted EPS of 63 cents, beating the Zacks Consensus Estimate by 8.6%. Revenues of $4.21 billion surpassed the Zacks Consensus Estimate by 4.4%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 12.6%. BSX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.3%.
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