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Charles River (CRL) Q2 Earnings Beat Estimates, 2021 View Up

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Charles River Laboratories International, Inc. CRL announced adjusted earnings per share (EPS) of $2.61 for second-quarter 2021, reflecting a 65.2% surge from year-ago earnings of $1.58. The metric surpassed the Zacks Consensus Estimate by 9.2%.

On a GAAP basis, earnings improved 28.4% year over year to $1.72.

Revenues

Revenues in the second quarter totaled $914.6 million, beating the Zacks Consensus Estimate by 5.2%. Moreover, the top line improved 33.9% from the year-ago number (up 24.1% organically, excluding the impact of acquisition and foreign currency translation).

Compared to the severe pandemic-hit second quarter of last year, Charles River’s second-quarter 2021 revenue growth was 8.6% (up 8% organically).

Segment in Detail

Charles River’s second-quarter total Research Models and Services (RMS) revenues of $176.7 million reflected an increase of 51.6% year over year (up 44.5% organically). Organic revenue growth was driven by robust demand for research models across all client segments and geographic regions, particularly in China, as well as higher revenue from research model services. COVID-led favorable year-over-year comparison contributed approximately 35% on a reported basis and 33.4% on an organic basis to RMS revenue growth in the second quarter.

Charles River Laboratories International, Inc. Price, Consensus and EPS Surprise

Charles River Laboratories International, Inc. Price, Consensus and EPS Surprise
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

Discovery and Safety Assessment (DSA) revenues of $540.1 million rose 22% (up 18.1% organically). Organic revenue growth was primarily driven by robust demand from global biopharmaceutical and biotechnology clients in both the Discovery Services and Safety Assessment businesses.

Manufacturing Solutions revenues totaled $197.8 million, up 60.2% year over year (up 26.6% organically). Organic revenues improved on strong demand in the Biologics Testing Solutions and Microbial Solutions businesses.

Margins

Gross profit in the reported quarter was $342 million, up 47.3% from the prior-year quarter. Gross margin of 37.4% expanded 337 basis points (bps).

Meanwhile, selling, general & administrative expenses rose 34.3% to $171.5 million.

Adjusted operating income totaled $170.5 million, reflecting a 63.1% surge from the prior-year quarter. Further, adjusted operating margin in the second quarter expanded 333 bps to 18.6%.

Guidance Raised

For 2021, Charles River raised its revenue and adjusted earnings guidance. Revenues are now expected to grow in the band of 20.5-22.5% compared with the earlier guidance of 19-21% Organic revenue growth is now expected in the range of 13-15% versus 12-14% earlier. The Zacks Consensus Estimate for total revenues is pegged at $3.51 billion, indicating a 20.1% rise from 2020.

Adjusted EPS for 2021 are expected in the range of $10.10-10.35, suggesting a rise from the earlier range of $9.75-$10.00. The current Zacks Consensus Estimate is pegged at $9.99.

Our Take

The company exited the second quarter of 2021 on a strong note, with better-than-expected revenues and earnings. The second quarter was highlighted by 24.1% organic revenue growth, driven by double-digit growth across all three segments. Robust demand in the Biologics Testing Solutions and Microbial Solutions businesses drove Manufacturing Solutions in the reported quarter. Based on a strong second- quarter performance and expectations of robust client demand through the remainder of the year, the company has raised its 2021 guidance. Meanwhile, the company expects strong synergies from the acquisition of Cognate, which will help it to offer CDMO services in the high-growth, high-science cell and gene therapy sector. Expansion of both margins is encouraging as well. On the flip side, escalating costs remain a concern. Stiff competition and foreign currency fluctuation are other woes.

Zacks Rank and Key Picks

The company currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space that have announced their quarterly results are West Pharmaceutical Services, Inc. WST, Encompass Health Corporation EHC and Chemed Corporation CHE.

West Pharmaceutical, carrying a Zacks Rank #1 (Strong Buy), reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encompass Health, carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Revenues of $1.3 billion outpaced the consensus mark by 1.5%.

Chemed, carrying a Zacks Rank #2, reported second-quarter 2021 adjusted EPS of $4.60, surpassing the Zacks Consensus Estimate by 3.4%. Revenues of $532.3 million surpassed the Zacks Consensus Estimate by 0.8%.


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