Back to top

Image: Bigstock

Why Is Charles River (CRL) Down 1.2% Since Last Earnings Report?

Read MoreHide Full Article

A month has gone by since the last earnings report for Charles River Laboratories (CRL - Free Report) . Shares have lost about 1.2% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Charles River Q1 Earnings Beat Estimates, Reported Revenue View Up

Charles River Laboratories reported adjusted earnings per share of $2.75 for first-quarter 2022, reflecting an 8.7% improvement from the year-ago earnings. The metric surpassed the Zacks Consensus Estimate by 1.5%.

On a GAAP basis, earnings surged 50.8% year over year to $2.75.

Revenues

Revenues in the first quarter totaled $913.9 million, beating the Zacks Consensus Estimate by 0.6%. Moreover, the top line improved 10.8% from the year-ago number (up 9.4% organically, excluding the impact of acquisition, divestiture and foreign currency translation).

Segment in Detail

Charles River’s first-quarter total Research Models and Services (RMS) revenues of $176.5 million were unchanged year over year (up 8.7% organically). Organic revenue growth was driven by broad-based growth for research models, particularly in North America, and research model services, particularly in the Insourcing Solutions (IS) business.

Discovery and Safety Assessment (DSA) revenues of $544.3 million rose 8.6% (up 9.5% organically). Organic revenue growth was mainly driven by strong contributions from Safety Assessment businesses.

Manufacturing Solutions revenues totaled $193.1 million, up 31.8% year over year (up 10.1% organically). Organic revenue growth was fueled by strong demand for Biologics Testing Solutions and Microbial Solutions.

Margins

The gross profit in the reported quarter was $913.9 million, up 10.8% from the prior-year quarter. The gross margin of 36.9% contracted 53 basis points (bps).

Meanwhile, selling, general & administrative expenses dropped 3.7% to $150 million.

Adjusted operating income totaled $186.8 million, reflecting a 22.4% rise from the prior-year quarter. The adjusted operating margin in the first quarter expanded 194 bps to 20.4%.

Liquidity and Cash Position

Charles River exited the first quarter of 2022 with cash and cash equivalents of $241.9 million compared with $241.2 million at the end of 2021.

Cumulative net cash provided by operating activities at the end of the first quarter was $102.6 million compared with the prior-year quarter’s $170.2 million.

2022 Guidance Update

The company updated its 2022 guidance.

For 2022, revenues are expected to grow in the band of 13.5-15.5% on a reported basis (earlier guidance was 13-15%). Organic revenue growth is restated in the range of 12.5-14.5%. The Zacks Consensus Estimate for total revenues is pegged at $4.03 billion, indicating a 13.7% rise from 2021.

Adjusted earnings per share for 2022 is reaffirmed in the range of $11.50-$11.75. The current Zacks Consensus Estimate is pegged at 11.63.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Charles River has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Charles River has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Charles River is part of the Zacks Medical Services industry. Over the past month, Teladoc (TDOC - Free Report) , a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended March 2022 more than a month ago.

Teladoc reported revenues of $565.35 million in the last reported quarter, representing a year-over-year change of +24.6%. EPS of -$0.47 for the same period compares with $0.13 a year ago.

Teladoc is expected to post a loss of $0.71 per share for the current quarter, representing a year-over-year change of +17.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Teladoc. Also, the stock has a VGM Score of D.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Charles River Laboratories International, Inc. (CRL) - free report >>

Teladoc Health, Inc. (TDOC) - free report >>

Published in