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Charles River (CRL) Hurt by NHP Shipment Issue, FX Woes
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Charles River (CRL - Free Report) is currently entangled in an investigation related to shipments of nonhuman primate (NHP) received from its Cambodian supplier. The global business environment continues to be challenging. The stock carries a Zacks Rank #4 (Sell).
Over the past year, Charles River has been underperforming its industry. The stock has declined 19.4% compared with the industry’s 13.7% plunge.
On Feb 17, Charles River received a subpoena from the U.S. Department of Justice related to this. Based on the ongoing investigations and a heightened focus on the Cambodia NHP supply chain, in recent months, the company had to voluntarily suspend its planned future shipments of Cambodian NHPs. This will continue until the point when the U.S. Fish and Wildlife Service can develop and implement new procedures to reinforce confidence that the NHPs it imports from Cambodia are purpose-bred. This will take time to implement. The investigation of the current NHP supply situation will result in study delays in the company’s Safety Assessment business. This might majorly impact the upcoming quarterly performance of Charles River.
Charles River Laboratories International, Inc. Price
Meanwhile, the company noted that the current Cambodian NHP supply constraints and the corresponding impact on its Safety Assessment business are expected to reduce the consolidated revenue growth forecast by approximately 200 basis points to 400 basis points for 2023, resulting in organic revenue growth guidance of 4.5% to 7.5% for the total business. Non-GAAP earnings per share are expected to be in the range of $9.70 to $10.90 in 2023 with the wider range encompassing a number of scenarios related to the timing of the resumption of Cambodian NHP imports in 2023.
Meanwhile, in the fourth quarter, within the Research Models and Services (RMS) business, China experienced a modest impact from an increase in COVID cases. Headwinds associated with escalating macroeconomic pressures and 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 in the face of mounting costs and expenses are other downsides.
Foreign exchange is a major headwind for Charles River due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets. We note that foreign exchange had a 350-basis point headwind in 2022.
On a positive note, Charles River exited the fourth quarter of 2022 with better-than-expected earnings and revenues. The company reported record quarterly revenues of $1.1 billion in the quarter, exceeding the $1 billion mark for the first time. The results highlighted 18.8% organic revenue growth, driven by strength across the Discovery and Safety Assessment (DSA) and RMS business segments. The company registered robust demand in the Safety Assessment business. In the second half, DSA's organic growth rate rose to 23.6% as the company exceeded the second-half growth acceleration that it had forecast since the beginning of 2022.
Charles River broadens the scope of the products and services across the drug discovery and early-stage development continuum through focused acquisitions. Within RMS, the company acquired Explora Biolabs in April 2022.
Key Picks
Some better-ranked stocks in the overall healthcare sector include Haemonetics Corporation (HAE - Free Report) , TerrAscend Corp. and Akerna Corp. . Haemonetics and TerrAscend both sport a Zacks Rank #1 (Strong Buy), while Akerna carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has risen 42.1% in the past year. Earnings estimates for Haemonetics have increased from $2.87 per share to 2.91 for 2023 and from $3.02 per share to $3.28 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.
Estimates for TerrAscend in 2023 have remained constant at a loss of 10 cents per share in the past 30 days. Shares of TerrAscend have declined 70.6% in the past year.
TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.
Akerna’s stock has declined 95.7% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.
Akerna missed earnings estimates in each of the last four quarters, delivering a negative earnings surprise of 15.49%, on average. In the last reported quarter, KERN delivered a negative earnings surprise of 13.33%.
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Charles River (CRL) Hurt by NHP Shipment Issue, FX Woes
Charles River (CRL - Free Report) is currently entangled in an investigation related to shipments of nonhuman primate (NHP) received from its Cambodian supplier. The global business environment continues to be challenging. The stock carries a Zacks Rank #4 (Sell).
Over the past year, Charles River has been underperforming its industry. The stock has declined 19.4% compared with the industry’s 13.7% plunge.
On Feb 17, Charles River received a subpoena from the U.S. Department of Justice related to this. Based on the ongoing investigations and a heightened focus on the Cambodia NHP supply chain, in recent months, the company had to voluntarily suspend its planned future shipments of Cambodian NHPs. This will continue until the point when the U.S. Fish and Wildlife Service can develop and implement new procedures to reinforce confidence that the NHPs it imports from Cambodia are purpose-bred. This will take time to implement. The investigation of the current NHP supply situation will result in study delays in the company’s Safety Assessment business. This might majorly impact the upcoming quarterly performance of Charles River.
Charles River Laboratories International, Inc. Price
Charles River Laboratories International, Inc. price | Charles River Laboratories International, Inc. Quote
Meanwhile, the company noted that the current Cambodian NHP supply constraints and the corresponding impact on its Safety Assessment business are expected to reduce the consolidated revenue growth forecast by approximately 200 basis points to 400 basis points for 2023, resulting in organic revenue growth guidance of 4.5% to 7.5% for the total business. Non-GAAP earnings per share are expected to be in the range of $9.70 to $10.90 in 2023 with the wider range encompassing a number of scenarios related to the timing of the resumption of Cambodian NHP imports in 2023.
Meanwhile, in the fourth quarter, within the Research Models and Services (RMS) business, China experienced a modest impact from an increase in COVID cases. Headwinds associated with escalating macroeconomic pressures and 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 in the face of mounting costs and expenses are other downsides.
Foreign exchange is a major headwind for Charles River due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the euro and some other developed market currencies has constantly been hampering the company’s performance in the international markets. We note that foreign exchange had a 350-basis point headwind in 2022.
On a positive note, Charles River exited the fourth quarter of 2022 with better-than-expected earnings and revenues. The company reported record quarterly revenues of $1.1 billion in the quarter, exceeding the $1 billion mark for the first time. The results highlighted 18.8% organic revenue growth, driven by strength across the Discovery and Safety Assessment (DSA) and RMS business segments. The company registered robust demand in the Safety Assessment business. In the second half, DSA's organic growth rate rose to 23.6% as the company exceeded the second-half growth acceleration that it had forecast since the beginning of 2022.
Charles River broadens the scope of the products and services across the drug discovery and early-stage development continuum through focused acquisitions. Within RMS, the company acquired Explora Biolabs in April 2022.
Key Picks
Some better-ranked stocks in the overall healthcare sector include Haemonetics Corporation (HAE - Free Report) , TerrAscend Corp. and Akerna Corp. . Haemonetics and TerrAscend both sport a Zacks Rank #1 (Strong Buy), while Akerna carries a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has risen 42.1% in the past year. Earnings estimates for Haemonetics have increased from $2.87 per share to 2.91 for 2023 and from $3.02 per share to $3.28 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.
Estimates for TerrAscend in 2023 have remained constant at a loss of 10 cents per share in the past 30 days. Shares of TerrAscend have declined 70.6% in the past year.
TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.
Akerna’s stock has declined 95.7% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.
Akerna missed earnings estimates in each of the last four quarters, delivering a negative earnings surprise of 15.49%, on average. In the last reported quarter, KERN delivered a negative earnings surprise of 13.33%.