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Charles River Guides Higher

Zacks Equity Research

Charles River Laboratories International Inc. (NYSE:CRL - News) provided a bright outlook for 2012 as it expects adjusted earnings to be 7-11% higher than the midpoint of the projected earnings range for 2011. The company expects 2012 net sales, on an adjusted basis, to grow in the range of 2-4%.

For 2011, the company expects revenue growth to be slightly higher than that recorded in 2010. The improved outlook is attributable to the return of stability in the market where Charles River operates.

Charles River expects to end 2012 with adjusted earnings in the range of $2.60-$2.70 per share as opposed to the projected range of $2.40-$2.45 for 2011. The Zacks Consensus Estimates for 2011 and 2012 are $2.43 and $2.64, respectively, well within the respective guidance ranges provided by the company.

Management further stated that 2012 earnings are expected to be driven primarily by its share buyback program. The company expects to repurchase 1-2 million shares in 2012.

Free cash flow is expected in the range of $160 - $170 million in 2012 as opposed to the 2011 forecasted range of $165 - $175 million. The lower projection is attributable to the rise in capital expenditures to approximately $50 million in 2012 from $40 million expected in 2011.

The increased projection for capital expenditures is due to certain big projects initiated in 2011, which are expected to be completed in 2012. Charles River intends to utilize the generated cash in 2012 for repurchasing stock, repaying debt apart from making small acquisitions.

Our Recommendation

We currently have a Neutral recommendation on Charles River. The stock carries a Zacks #3 Rank, which is tantamount to a short-term Hold rating.

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