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Charles River (CRL) DSA Arm Sees Growth, Cell Supply Sluggish

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Charles River Laboratories’ CRL strong organic revenue growth and robust demand from biotech as well as pharmaceutical clients demonstrate the power of the company’s advanced portfolio. A dull cell supply business however might dampen top-line growth.

Over the past year, Charles River has been outperforming its industry. The stock has gained 3.5% against the industry’s 59.8% decline.

Charles River exited the fourth quarter of 2021 with better-than-expected earnings and revenues. Results highlight 10.5% organic revenue growth, driven by strength across all three segments. Biotech clients continued to drive revenue growth in the reported quarter, with global pharmaceuticals clients also contributing.

Robust demand in the Biologics Testing Solutions and Microbial Solutions businesses drove Manufacturing Solutions in the reported quarter. The acquisitions of Cognate BioServices and Vigene Biosciences also contributed to growth in the Manufacturing Solutions arm.

Strong customer uptake in the Discovery Services and Safety Assessment (DSA) businesses instills optimism. This segment reported 6.7% organic revenue growth in the fourth quarter of 2022, driven by robust demand from global biopharmaceutical and biotechnology clients in both Discovery Services and Safety Assessment businesses. The DSA segment continued to perform well, with strong performances in early discovery and CNS services.

Margin expansion and meaningful cash flow generation are other upsides. The 2022 financial projections with strong growth expectations too buoy investors’ optimism.

On the flip side, during the fourth quarter, within Charles River’s Research Models and Services (RMS) business, the impact of the RMS Japan divestiture reduced revenues by 7.2%. The impact of foreign currency translation reduced revenues by 0.4%.

Charles River Laboratories International, Inc. Price

Charles River Laboratories International, Inc. Price
Charles River Laboratories International, Inc. Price

Charles River Laboratories International, Inc. price | Charles River Laboratories International, Inc. Quote

Fourth-quarter revenues of the cell supply business, which consists of HemaCare and Cellero, continued to be impacted by donor access and availability. Within DSA, the impact of foreign currency translation reduced revenues by 0.4% and operating margin by approximately 40 basis points.

Within Manufacturing Solutions, the impact of foreign currency translation reduced revenues by 1.6%.

Zacks Rank and Key Picks

Charles River currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Envista Holdings Corporation NVST, McKesson Corporation MCK and Molina Healthcare, Inc. MOH, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Envista reported fourth-quarter 2021 adjusted EPS of 46 cents, which beat the Zacks Consensus Estimate by 9.5%. Revenues of $651.8 million outpaced the consensus mark by 2.9%.

Envista has a long-term earnings growth rate of 13.5%. NVST has gained 20.5% against the industry’s 19.4% drop over the past year.

McKesson reported third-quarter fiscal 2022 adjusted EPS of $6.15, which beat the Zacks Consensus Estimate of $5.38 per share by 14.3%. Revenues of $68.61 billion surpassed the Zacks Consensus Estimate by 3.2%.

McKesson has a long-term earnings growth rate of 11.8%. MCK has gained 49.7% compared with the industry’s 4.7% growth in the past year.

Molina Healthcare reported fourth-quarter 2021 adjusted EPS of $2.88, beating the Zacks Consensus Estimate of $2.82. Total revenues of $7,409 million beat the consensus mark of $7,126 million.

Molina Healthcare has a long-term earnings growth rate of 18.8%. MOH has gained 42.7% compared with the industry’s 43.2% increase over the past year.


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