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Charles River (CRL) Q1 Earnings & Revenues Beat, Fall Y/Y
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Charles River Laboratories International, Inc. (CRL - Free Report) reported first-quarter 2024 adjusted earnings per share (EPS) of $2.27, which reflected an 18.3% decrease year over year. However, the metric surpassed the Zacks Consensus Estimate by 10.7%.
On a GAAP basis, earnings declined 35.3% year over year to $1.30 per share. The year-over-year decline in GAAP earnings was primarily due to lower revenues and gross and operating income.
Revenues
Revenues in the first quarter totaled $1.01 billion, beating the Zacks Consensus Estimate by 1.4%. However, the top line fell 1.7% from the year-ago quarter (down 3.3% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Segments in Detail
The company reports through three segments: Research Models and Services (“RMS”), Discovery and Safety Assessment (“DSA”) and Manufacturing Solutions.
In the first quarter of 2024, RMS revenues of $220.9 million were up 10.6% year over year (up 3.3% organically). The organic revenue increase was primarily due to higher revenues for non-human primates (NHPs) in China, as well as higher sales of small research models in all geographic regions and higher revenues for research models services, including in the Insourcing Solutions business. Our model estimated RMS business revenues to be $199.9 million in the first quarter.
DSA revenues of $605.5 million fell 8.6% year over year (down 8.7% organically). The organic revenue decline was mainly due to lower revenues in both the Discovery Services and Safety Assessment businesses, which included a difficult, prior-year growth comparison in the Safety Assessment business. Our model’s projected revenues for this segment were $629.8 million.
Manufacturing Solutions revenues totaled $185.2 million, up 10.7% year over year (up 10.4% organically). Organic revenue growth reflected higher revenues across all segments led by the CDMO business. For the first quarter, our model projected revenues to be $167.5 million.
Charles River Laboratories International, Inc. Price, Consensus and EPS Surprise
The gross profit in the reported quarter was $344.8 million, down 8.7% from the prior-year quarter. The gross margin of 34.1% contracted 260 basis points (bps) year over year, with a 2.3% rise in the total costs of the company.
Selling, general & administrative expenses increased 6.5% to $186.3 million. Adjusted operating income totaled $158.5 million, reflecting a 21.8% decline from the prior year quarter. The adjusted operating margin in the first quarter contracted 403 bps to 15.7%.
Liquidity and Cash Position
Charles River exited the first quarter of 2024 with cash and cash equivalents of $327 million, compared with $276.7 million at the end of 2023.
Cumulative net cash provided by operating activities at the end of the first quarter was $129.9 million compared with $109.4 million at the end of first-quarter 2023.
2024 Guidance
Despite modest adjustments to quarterly gating in 2024, Charles River has reiterated its guidance for the year.
Total revenue growth is once again expected in the band of 1%-4% on a reported basis. Organic revenues are expected to be flat to up 3% (unchanged). The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $4.22 billion.
Adjusted EPS for 2024 is expected in the range of $10.90-$11.40. The Zacks Consensus Estimate for the metric is pegged at $11.01.
Our Take
Charles River exited the first quarter of 2024 with better-than-expected earnings and revenues. However, both the top and bottom lines registered a year-over-decline in the quarter.
Both the Manufacturing and RMS business segments reported organic revenue growth. However, this was largely offset by lower revenues in the DSA segment. Contraction of both margins does not bode well for the company.
On a positive note, Charles River is focused on innovation, enhancing its portfolio to support clients from target discovery to non-clinical development and delivering flexible solutions to respond to a changing industry and client requirements.
Zacks Rank and Key Picks
Charles River currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space are Medpace (MEDP - Free Report) , ResMed (RMD - Free Report) and Encompass Health Corporation (EHC - Free Report) .
Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.
ResMed, sporting a Zacks Rank #1, reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.
RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry’s 15.7%. The company delivered an average earnings surprise of 2.8% for the trailing four quarters.
Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.
EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.
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Charles River (CRL) Q1 Earnings & Revenues Beat, Fall Y/Y
Charles River Laboratories International, Inc. (CRL - Free Report) reported first-quarter 2024 adjusted earnings per share (EPS) of $2.27, which reflected an 18.3% decrease year over year. However, the metric surpassed the Zacks Consensus Estimate by 10.7%.
On a GAAP basis, earnings declined 35.3% year over year to $1.30 per share. The year-over-year decline in GAAP earnings was primarily due to lower revenues and gross and operating income.
Revenues
Revenues in the first quarter totaled $1.01 billion, beating the Zacks Consensus Estimate by 1.4%. However, the top line fell 1.7% from the year-ago quarter (down 3.3% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Segments in Detail
The company reports through three segments: Research Models and Services (“RMS”), Discovery and Safety Assessment (“DSA”) and Manufacturing Solutions.
In the first quarter of 2024, RMS revenues of $220.9 million were up 10.6% year over year (up 3.3% organically). The organic revenue increase was primarily due to higher revenues for non-human primates (NHPs) in China, as well as higher sales of small research models in all geographic regions and higher revenues for research models services, including in the Insourcing Solutions business. Our model estimated RMS business revenues to be $199.9 million in the first quarter.
DSA revenues of $605.5 million fell 8.6% year over year (down 8.7% organically). The organic revenue decline was mainly due to lower revenues in both the Discovery Services and Safety Assessment businesses, which included a difficult, prior-year growth comparison in the Safety Assessment business. Our model’s projected revenues for this segment were $629.8 million.
Manufacturing Solutions revenues totaled $185.2 million, up 10.7% year over year (up 10.4% organically). Organic revenue growth reflected higher revenues across all segments led by the CDMO business. For the first quarter, our model projected revenues to be $167.5 million.
Charles River Laboratories International, Inc. Price, Consensus and EPS Surprise
Charles River Laboratories International, Inc. price-consensus-eps-surprise-chart | Charles River Laboratories International, Inc. Quote
Margins
The gross profit in the reported quarter was $344.8 million, down 8.7% from the prior-year quarter. The gross margin of 34.1% contracted 260 basis points (bps) year over year, with a 2.3% rise in the total costs of the company.
Selling, general & administrative expenses increased 6.5% to $186.3 million. Adjusted operating income totaled $158.5 million, reflecting a 21.8% decline from the prior year quarter. The adjusted operating margin in the first quarter contracted 403 bps to 15.7%.
Liquidity and Cash Position
Charles River exited the first quarter of 2024 with cash and cash equivalents of $327 million, compared with $276.7 million at the end of 2023.
Cumulative net cash provided by operating activities at the end of the first quarter was $129.9 million compared with $109.4 million at the end of first-quarter 2023.
2024 Guidance
Despite modest adjustments to quarterly gating in 2024, Charles River has reiterated its guidance for the year.
Total revenue growth is once again expected in the band of 1%-4% on a reported basis. Organic revenues are expected to be flat to up 3% (unchanged). The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $4.22 billion.
Adjusted EPS for 2024 is expected in the range of $10.90-$11.40. The Zacks Consensus Estimate for the metric is pegged at $11.01.
Our Take
Charles River exited the first quarter of 2024 with better-than-expected earnings and revenues. However, both the top and bottom lines registered a year-over-decline in the quarter.
Both the Manufacturing and RMS business segments reported organic revenue growth. However, this was largely offset by lower revenues in the DSA segment. Contraction of both margins does not bode well for the company.
On a positive note, Charles River is focused on innovation, enhancing its portfolio to support clients from target discovery to non-clinical development and delivering flexible solutions to respond to a changing industry and client requirements.
Zacks Rank and Key Picks
Charles River currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space are Medpace (MEDP - Free Report) , ResMed (RMD - Free Report) and Encompass Health Corporation (EHC - Free Report) .
Medpace, sporting a Zacks Rank #1 (Strong Buy), reported first-quarter 2024 EPS of $3.20, which beat the Zacks Consensus Estimate by 30.6%. Revenues of $511 million improved 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.
Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.
ResMed, sporting a Zacks Rank #1, reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.
RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry’s 15.7%. The company delivered an average earnings surprise of 2.8% for the trailing four quarters.
Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.
EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.