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Charles River (CRL) Q3 Earnings Top Estimates, Margins Dip
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Charles River Laboratories International, Inc. (CRL - Free Report) reported adjusted earnings per share (EPS) of $2.63 for third-quarter 2022, reflecting a 2.6% decline from the year-ago earnings. The metric however surpassed the Zacks Consensus Estimate by 4.8%.
In the quarter, lower operating margins, as well as increased interest expense and a higher tax rate impacted the bottom line.
On a GAAP basis, earnings declined 3.9% year over year to $2.65 per share.
Revenues
Revenues in the third quarter totaled $989.2 million, beating the Zacks Consensus Estimate by 1.1%. The top line improved 10.4% from the year-ago number (up 15.3% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Segment in Detail
Charles River’s third-quarter total Research Models and Services (RMS) revenues of $180.1 million were up 5.2% year over year (up 8% organically). Organic revenue growth was driven by growth in research model services, particularly Insourcing Solutions (IS) and small research models in North America and China.
Discovery and Safety Assessment (DSA) revenues of $619.5 million rose 16.5% (up 20.8% organically). Organic revenue growth was mainly driven by broad-based growth in the Safety Assessment business on meaningful price increases and higher study volume.
Manufacturing Solutions revenues totaled $189.6 million, down 1.7% year over year (up 6% organically). Organic revenue growth was fueled by higher revenues in the Biologics Testing and Microbial Solutions businesses, partially offset by a revenue decline in the CDMO business.
Margins
The gross profit in the reported quarter was $370.2 million, up 9.8% from the prior-year quarter. However, the gross margin of 37.4% contracted 21 basis points (bps) year over year on a 10.8% rise in the total costs of the company.
Meanwhile, selling, general & administrative expenses rose 23.7% to $183.7 million.
Adjusted operating income totaled $186.5 million, reflecting a 1.1% drop from the prior-year quarter. The adjusted operating margin in the third quarter contracted 220 bps to 18.9%.
Liquidity and Cash Position
Charles River exited the third quarter of 2022 with cash and cash equivalents of $193.7 million compared with $200.3 million at the end of Q2.
Cumulative net cash provided by operating activities at the end of the third quarter was $384.9 million compared with the prior-year quarter’s $531.5 million.
2022 Guidance Update
The company has reduced its 2022 guidance.
For 2022, the revenue growth expectation has now been narrowed to the band of 10-11% on a reported basis (from the earlier guidance of 9-11%). Organic revenue growth is now expected in the range of 11-12% (10-12% previously). The Zacks Consensus Estimate for total revenues is pegged at $3.90 billion, indicating a 10.2% rise from 2021.
Adjusted EPS for 2022 is expected in the range of $10.80-$10.95 ($10.70-$10.95 expected previously). The current Zacks Consensus Estimate is pegged at $10.76.
Our Take
Charles River exited the third quarter of 2022 with better-than-expected earnings and revenues. The results highlighted a more than 15% organic revenue growth, driven by strength across the DSA and Research Models and Services RMS business segments. Operating margin expansion and meaningful cash flow generation were the other upsides.The narrowed 2022 adjusted EPS and revenue guidance reflect improved third-quarter top-line performance.
On the flip side, a revenue decline in the CDMO business dragged Manufacturing Solutions revenues down. Headwinds associated with foreign exchange due to the strengthening of the U.S. dollar and interest expense due to a rising interest rate environment increase concerns. Margin contractions on the face of mounting costs and expenses are other downsides.
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 Elevance Health Inc. (ELV - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.
Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
Merit Medical, flaunting a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.
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Charles River (CRL) Q3 Earnings Top Estimates, Margins Dip
Charles River Laboratories International, Inc. (CRL - Free Report) reported adjusted earnings per share (EPS) of $2.63 for third-quarter 2022, reflecting a 2.6% decline from the year-ago earnings. The metric however surpassed the Zacks Consensus Estimate by 4.8%.
In the quarter, lower operating margins, as well as increased interest expense and a higher tax rate impacted the bottom line.
On a GAAP basis, earnings declined 3.9% year over year to $2.65 per share.
Revenues
Revenues in the third quarter totaled $989.2 million, beating the Zacks Consensus Estimate by 1.1%. The top line improved 10.4% from the year-ago number (up 15.3% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Segment in Detail
Charles River’s third-quarter total Research Models and Services (RMS) revenues of $180.1 million were up 5.2% year over year (up 8% organically). Organic revenue growth was driven by growth in research model services, particularly Insourcing Solutions (IS) and small research models in North America and China.
Discovery and Safety Assessment (DSA) revenues of $619.5 million rose 16.5% (up 20.8% organically). Organic revenue growth was mainly driven by broad-based growth in the Safety Assessment business on meaningful price increases and higher study volume.
Manufacturing Solutions revenues totaled $189.6 million, down 1.7% year over year (up 6% organically). Organic revenue growth was fueled by higher revenues in the Biologics Testing and Microbial Solutions businesses, partially offset by a revenue decline in the CDMO business.
Margins
The gross profit in the reported quarter was $370.2 million, up 9.8% from the prior-year quarter. However, the gross margin of 37.4% contracted 21 basis points (bps) year over year on a 10.8% rise in the total costs of the company.
Meanwhile, selling, general & administrative expenses rose 23.7% to $183.7 million.
Adjusted operating income totaled $186.5 million, reflecting a 1.1% drop from the prior-year quarter. The adjusted operating margin in the third quarter contracted 220 bps to 18.9%.
Liquidity and Cash Position
Charles River exited the third quarter of 2022 with cash and cash equivalents of $193.7 million compared with $200.3 million at the end of Q2.
Cumulative net cash provided by operating activities at the end of the third quarter was $384.9 million compared with the prior-year quarter’s $531.5 million.
2022 Guidance Update
The company has reduced its 2022 guidance.
For 2022, the revenue growth expectation has now been narrowed to the band of 10-11% on a reported basis (from the earlier guidance of 9-11%). Organic revenue growth is now expected in the range of 11-12% (10-12% previously). The Zacks Consensus Estimate for total revenues is pegged at $3.90 billion, indicating a 10.2% rise from 2021.
Adjusted EPS for 2022 is expected in the range of $10.80-$10.95 ($10.70-$10.95 expected previously). The current Zacks Consensus Estimate is pegged at $10.76.
Our Take
Charles River exited the third quarter of 2022 with better-than-expected earnings and revenues. The results highlighted a more than 15% organic revenue growth, driven by strength across the DSA and Research Models and Services RMS business segments. Operating margin expansion and meaningful cash flow generation were the other upsides.The narrowed 2022 adjusted EPS and revenue guidance reflect improved third-quarter top-line performance.
On the flip side, a revenue decline in the CDMO business dragged Manufacturing Solutions revenues down. Headwinds associated with foreign exchange due to the strengthening of the U.S. dollar and interest expense due to a rising interest rate environment increase concerns. Margin contractions on the face of mounting costs and expenses are other downsides.
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 Elevance Health Inc. (ELV - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.
Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
Merit Medical, flaunting a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.
Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.