Charles River Laboratories International, Inc. (CRL Quick QuoteCRL - Free Report) expands its products and services across the drug discovery and early-stage development continuum through targeted partnerships and acquisitions. The company’s Research Models and Services (RMS) segment is gaining from strong revenues of small research models. Signs of stabilization and improved bookings in the Discovery and Safety Assessment (DSA) segment are encouraging. Yet, the adverse macroeconomic impacts and currency woes pose risks for the company’s operations.

In the past year, this Zacks Rank #3 (Hold) stock has fallen 36.2% compared with the industry’s 19.6% drop. However, the S&P 500 composite has risen 11.7% during the same period.

The renowned, non-clinical global drug development company has a market capitalization of $6.92 billion. Charles River has an earnings yield of 6.8%, which compares favorably to the industry’s 3.9% yield. It surpassed estimates in each of the trailing four quarters, delivering an average earnings surprise of 10.9%.

Let’s delve deeper.

Upsides for CRL Stock

Strategic Deals Drive Growth: During the first quarter of 2025, the company partnered with Akron Bio to enhance operations with the integration of CGMP materials into the cell therapy platform. Charles River extended its global partnership with Deciphex to expand its digital pathology offering with exclusive image management solutions. In 2024, the company strengthened its neurological research efforts through multiple collaborations. It teamed up with H. Lundbeck A/S (Lundbeck) to use their AI-powered end-to-end drug discovery solution to advance brain disease research. Charles River enhanced its preclinical services by integrating Insightec’s focused ultrasound technology.

Additionally, it collaborated with the FOXG1 Research Foundation to advance its gene therapy through clinical trials. Under a contract development and manufacturing organization agreement, the company will manufacture Good Manufacturing Practice plasmid DNA for AAVantgarde. Furthermore, a collaborative relationship with Autobahn Labs established Charles River as the preferred research partner to support their growing pipeline of early-stage, preclinical therapeutics programs.

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RMS Prospects Bright: Throughout 2024, revenues for small models continued to increase in all geographies, particularly in China and Europe. These are essential low-cost tools for research, which also enhance the company’s ability to continue to realize price increases globally. In the first quarter of 2025, higher revenues for small research models across all geographic regions were mainly driven by higher pricing. Additionally, revenues from North American academic and government clients increased slightly, with no meaningful impact from NIH budget cuts so far.

Historically, the CRADL (Charles River Accelerator and Development Lab) service has been one of the largest growth drivers for RMS, but of late, it has been impacted by the overall biopharma demand environment. Despite this, CRADL’s business model continues to resonate with clients looking to access flexible vivarium space without having to invest in internal infrastructure, offering a strong value proposition for those looking to reduce costs and conserve capital. Furthermore, the GEMS (Genetically Engineered Models and Services) business is also expected to rebound as more clients use these services to support their complex research and maintain genetically modified model colonies.

DSA, A Potential Growth Driver: The company is gaining from its extensive expertise in the discovery of preclinical candidates and the design, execution and reporting of safety assessment studies for numerous types of compounds, including cell and gene therapies and small and large molecule pharmaceuticals. Among major acquisitions, Charles River acquired Noveprim, the Mauritius-based provider of non-human primates, in 2023, bolstering and diversifying the supply chain for this segment. It also acquired SAMDI Tech, Inc. (SAMDI), a leading provider of high-quality, label-free, high-throughput screening solutions for drug discovery research.

Amid broader economic uncertainty, the company saw signs of stabilization in the first quarter of 2025, with a better-than-expected DSA performance. DSA net book-to-bill rose above 1X for the first time in more than two years due to improved quarterly bookings. The company now expects the segment to deliver incremental revenues in 2025, particularly during the first half, reflecting this positive development.

Factors Affecting Charles River

Macroeconomic Condition: Charles River is experiencing a cautious spending environment, particularly among its global biopharma and biotech clients within the DSA segment. Additionally, the recent NIH policy change may slow client purchasing decisions in the RMS segment, affecting the company’s financial results. CRL anticipates that the ongoing funding challenges among early-stage biotech clients are likely to dampen CRADL service demand and slow down the expected utilization capacity in 2025. On a broader macroeconomic level, the company is now subject to tariffs on imports from its major supplier countries, such as Vietnam, Mauritius and China, and plans to largely offset the expenses through price increases.

Foreign Exchange Impacts Sales:  A significant portion of Penumbra’s sales and costs are exposed to changes in foreign exchange rates. The company’s operations use multiple foreign currencies, including the euro and Japanese yen. Changes in those currencies relative to the U.S. dollar will impact its sales, cost of sales and expenses, and consequently, net income.

CRL Stock Estimate Trend

The Zacks Consensus Estimate for CRL’s 2025 earnings has jumped 2.9% in the past 30 days.

The Zacks Consensus Estimate for the company’s 2025 revenues is pegged at $3.89 billion, suggesting a 3.9% decrease from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Phibro Animal Health (PAHC Quick QuotePAHC - Free Report) , Prestige Consumer Healthcare (PBH Quick QuotePBH - Free Report) and Inspira Medical Health (INSP Quick QuoteINSP - Free Report) .

Phibro Animal Health has an estimated long-term earnings growth rate of 26.2% compared with the industry’s 15.9%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 30.6%. Its shares have rallied 32.6% compared with the industry’s 6.8% growth in the past year.

PAHC carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prestige Consumer Healthcare, currently carrying a Zacks Rank #2, has an earnings yield of 5.4% compared with the industry’s flat yield. Shares of the company have rallied 36.8% compared with the industry’s 10.8% growth. PBH’s earnings surpassed estimates in three of the trailing four quarters and matched on one occasion, the average surprise being 2.8%.

Inspira Medical Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 28.9% compared with the industry’s 25.2%. Shares of the company have fallen 1.4% against the industry’s 21.2% growth. INSP’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 356.9%.