Charles River Laboratories International, Inc. CRL reported second-quarter 2024 adjusted earnings per share (EPS) of $2.80, which increased 4.1% year over year. The figure surpassed the Zacks Consensus Estimate by 17.2%.
On a GAAP basis, earnings declined 7.9% year over year to $1.74 per share.
Revenues
Revenues totaled $1.03 billion, in line with the Zacks Consensus Estimate. However, the top line declined 2.8% from the year-ago quarter’s level (down 3.2% 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.
RMS’ revenues of $206.4 million were down 1.7% year over year (down 3.9% organically). The organic decrease in revenues was primarily due to lower revenues from non-human primates (NHPs) in China as well as research model services and the Cell Solutions business. Our model estimated RMS business revenues to be $194.2 million in the second quarter.
DSA’s revenues of $627.4 million fell 5.4% year over year (down 5% organically). The organic decline in revenues was mainly due to lower revenues from both the Discovery Services and Safety Assessment businesses, which included a difficult, prior-year growth comparison in the Safety Assessment business. Our model projected revenues of $637.7 million for this segment.
Manufacturing Solutions’ revenues totaled $192.3 million, up 3.1% year over year (up 3.7% organically). Organic revenue growth reflected higher revenues across all segments, led by the CDMO business. For the second quarter, our model projected revenues to be $191.3 million.
Margins
The gross profit in the reported quarter was $353.7 million, down 11.3% from the prior-year quarter’s level. The gross margin of 34.5% contracted 317 basis points (bps) year over year, with a 1.7% rise in the total cost of the company.
Selling, general & administrative expenses decreased 15% year over year to $169.8 million. Adjusted operating income totaled $183.9 million, reflecting a 7.7% decline from the prior-year quarter’s level. The adjusted operating margin contracted 87 bps to 17.9%.
Liquidity and Cash Position
Charles River exited the second quarter with cash and cash equivalents of $179.2 million compared with $327 million at the end of the first quarter.
Cumulative net cash provided by operating activities at the end of the second quarter was $323.4 million compared with $257.5 million at the end of second-quarter 2023.
2024 Guidance
Charles River has lowered its guidance for the year.
CRL now expects total revenues to decrease 4.5-2.5% (earlier guidance for revenue growth was in the band of 1-4%) on a reported basis. The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $4.21 billion.
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
Adjusted EPS for 2024 is now expected to be in the range of $9.90-$10.20 (down from the previously projected range of $10.90-$11.40). The Zacks Consensus Estimate for the metric is pegged at $10.99.
Our Take
Charles River’s earnings beat estimates, while revenues met the same. While the bottom line improved year over year, the top line decreased.
All segments’ (except Manufacturing Solutions) reported as well as organic revenues declined year over year. Contraction of both margins does not bode well for the company. The significant decline in the 2024 financial outlook is discouraging.
According to management, the forward-looking DSA trends suggest that demand will not improve as expected earlier during the second half of 2024. It will, in fact, decline for global biopharmaceutical clients.
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 changing industry and client needs.
Zacks Rank and Key Picks
Charles River currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Abbott Laboratories, Inc. ABT and Quest Diagnostics DGX.
Intuitive Surgical reported a second-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical has a long-term earnings growth rate of 16.1% for 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.
Abbott, carrying a Zacks Rank #2 (Buy) at present, reported second-quarter 2024 earnings of $1.14 per share, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.
ABT has an earnings growth rate of 10.1% for 2025 compared with the S&P 500’s 9.3%. The company beat on earnings in each of the trailing four quarters, the average surprise being 2.34%.
Quest Diagnostics, carrying a Zacks Rank #2 at present, reported a second-quarter adjusted EPS of $2.35, which surpassed the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion outpaced the Zacks Consensus Estimate by 0.5%.
DGX has a historical five-year earnings growth rate of 7.4% compared with the industry’s 4.2%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.31%.
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