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Here's Why You Should Retain Charles River (CRL) Stock Now
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Charles River Laboratories International, Inc. (CRL - Free Report) is gaining from robust performances across the Research Models and Services (RMS) and Discovery and Safety Assessment (DSA) segments. The company’s strategic acquisitions instill optimism. However, stiff rivalry and unfavorable foreign exchange movements do not bode well.
In the past year, this Zacks Rank #3 (Hold) stock has declined 41.3% compared with the industry’s 33.8% plunge and a 21.2% decline of the S&P 500.
The full-service, early-stage contract research organization has a market capitalization of $11.13 billion. The company projects 14% growth for the next five years compared with the industry and a projected growth rate of 13.5%. Its earnings surpassed estimates in the trailing four quarters, delivering an average surprise of 2.56%.
Let’s delve deeper.
Factors at Play
Strategic Acquisitions Drive Growth: Charles River broadens the scope of its products and services across the drug discovery and early-stage development continuum through focused acquisitions. Within DSA, the Retrogenix (an early-stage contract research organization) acquisition of 2021, with its proprietary cell microarray technology and off-target screening services, is currently contributing strongly to the company’s top line.
RMS Business Rebounds: In the third quarter, RMS revenues increased 8% organically year over year, in line with the company’s high single-digit outlook for 2022. Organic revenue growth was driven by strong demand and meaningful price increases in the Research Models business in North America, as well as for Global Research Models Services, particularly Insourcing Solutions and GEMS. China too rebounded, following the impact of COVID-related restrictions in the second quarter.
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DSA Arm Continues to Thrive: This segment reported 20.8% organic revenue growth in the third quarter of 2022. Broad-based growth in the Safety Assessment business was the principal driver behind the nearly two-fold increase in the DSA revenue growth rate from the second quarter level. Currently, Charles River continues to expect mid-teens DSA organic revenue growth in 2022. DSA backlog and booking activity through the third quarter continues to support sustained growth.
Downsides
Forex Woes: Foreign exchange is a major headwind for Charles River due to a considerable percentage of its revenues coming from outside the United States. For 2022, the impact of foreign currency translation is expected to reduce revenues by 1.5%.
Competitive Landscape: Charles River competes in the marketplace on the back of its therapeutic and scientific expertise in early-stage drug research, quality, reputation, flexibility, responsiveness, pricing, innovation and global capabilities. The company primarily faces a broad range of competitors of different sizes and capabilities in each of its three business segments.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Charles River’s 2022 earnings has moved 1.1% north to $10.88.
The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $3.91 billion, suggesting a 10.6% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are ShockWave Medical, Inc. (SWAV - Free Report) , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average being 129.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, 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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Here's Why You Should Retain Charles River (CRL) Stock Now
Charles River Laboratories International, Inc. (CRL - Free Report) is gaining from robust performances across the Research Models and Services (RMS) and Discovery and Safety Assessment (DSA) segments. The company’s strategic acquisitions instill optimism. However, stiff rivalry and unfavorable foreign exchange movements do not bode well.
In the past year, this Zacks Rank #3 (Hold) stock has declined 41.3% compared with the industry’s 33.8% plunge and a 21.2% decline of the S&P 500.
The full-service, early-stage contract research organization has a market capitalization of $11.13 billion. The company projects 14% growth for the next five years compared with the industry and a projected growth rate of 13.5%. Its earnings surpassed estimates in the trailing four quarters, delivering an average surprise of 2.56%.
Let’s delve deeper.
Factors at Play
Strategic Acquisitions Drive Growth: Charles River broadens the scope of its products and services across the drug discovery and early-stage development continuum through focused acquisitions. Within DSA, the Retrogenix (an early-stage contract research organization) acquisition of 2021, with its proprietary cell microarray technology and off-target screening services, is currently contributing strongly to the company’s top line.
RMS Business Rebounds: In the third quarter, RMS revenues increased 8% organically year over year, in line with the company’s high single-digit outlook for 2022. Organic revenue growth was driven by strong demand and meaningful price increases in the Research Models business in North America, as well as for Global Research Models Services, particularly Insourcing Solutions and GEMS. China too rebounded, following the impact of COVID-related restrictions in the second quarter.
DSA Arm Continues to Thrive: This segment reported 20.8% organic revenue growth in the third quarter of 2022. Broad-based growth in the Safety Assessment business was the principal driver behind the nearly two-fold increase in the DSA revenue growth rate from the second quarter level. Currently, Charles River continues to expect mid-teens DSA organic revenue growth in 2022. DSA backlog and booking activity through the third quarter continues to support sustained growth.
Downsides
Forex Woes: Foreign exchange is a major headwind for Charles River due to a considerable percentage of its revenues coming from outside the United States. For 2022, the impact of foreign currency translation is expected to reduce revenues by 1.5%.
Competitive Landscape: Charles River competes in the marketplace on the back of its therapeutic and scientific expertise in early-stage drug research, quality, reputation, flexibility, responsiveness, pricing, innovation and global capabilities. The company primarily faces a broad range of competitors of different sizes and capabilities in each of its three business segments.
Estimate Trend
Over the past 30 days, the Zacks Consensus Estimate for Charles River’s 2022 earnings has moved 1.1% north to $10.88.
The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $3.91 billion, suggesting a 10.6% rise from the 2021 reported number.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are ShockWave Medical, Inc. (SWAV - Free Report) , Orthofix Medical Inc. (OFIX - Free Report) and Merit Medical System (MMSI - Free Report) .
ShockWave Medical, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 35% against the industry’s 32.6% fall in the past year.
Orthofix Medical, currently sporting a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 adjusted EPS of 13 cents, which beat the Zacks Consensus Estimate by a stupendous 550%. Revenues of $114 million outpaced the consensus mark by 2.7%.
Orthofix Medical has an estimated next-year growth rate of 58.97%. OFIX’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average being 129.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Merit Medical, currently carrying a Zacks Rank of 2, 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%.