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Analyst Blog

Charles River Laboratories International Inc. (CRL - Snapshot Report) reported fourth quarter 2011 earnings (excluding special items) of 69 cents per share, much above the Zacks Consensus Estimate of 56 cents, and 15% above the year-ago earnings of 60 cents. The earnings benefited from share repurchases.

Quarterly revenue of $291.0 million, up 3.3% year over year, was driven by higher sales in the Research Models and Services (“RMS”) segment and was partially offset by a decline in the Preclinical Services (“PCS”) segment sales. Revenue came in above the Zacks Consensus Estimate of $282 million.

For full year 2011, Charles River reported earnings of $2.56 per share, above the Zacks Consensus Estimate of $2.43 and well beyond the guidance range of $2.40–$2.45. Earnings, were up 28.6% from the year-ago figure of $1.99 per share. Revenues, increased marginally by 80 bps from the year-ago figure to $1.14 billion, but was slightly below the Zacks Consensus Estimate of $1.15 billion.

Quarter in Detail

Charles Riveroperates through two segments - RMS and PCS.

Revenue from the RMS segment was $182.4 million in the fourth quarter, up 8.3% from the prior-year period. Segment revenue was boosted by strong sales of In Vitro and Avian products and RMS services. Excluding the 0.4% gain from foreign exchange (“Fx”), RMS segment revenue moved up 7.9% year over year.

Revenue from the PCS segment was $108.5 million in the fourth quarter, down 4.2% from the prior-year period (down 3.9% excluding the negative impact of Fx). Unfavorable sales mix, comprising a greater proportion of short-term less complex studies, adversely affected the revenue performance.

Outlook for 2012

Charles River reiterated its 2012 adjusted earnings guidance range of $2.60–$2.70 per share, provided earlier in December 2011. The Zacks Consensus Estimate of $2.64 per share is within the company’s guidance range. Net sales are expected to grow in the range of 0% - 2%, with Fx impact of approximately 1%.

Our Recommendation

We currently have a Neutral recommendation on Charles River. The stock carries a Zacks #3 Rank, which translates into a short-term Hold rating.

Despite consistent performance of the RMS segment, the PCS business fails to show any definite sign of recovery, thus keeping us on the sidelines.

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