Here's Why You Should Retain Charles River (CRL) Stock Now
Charles River Laboratories International, Inc. CRL is well-poised for growth in the coming quarters, backed by RMS segment continued growth benefitted from broad-based growth in all geographic regions for small research models. Further, the CRADL initiative is contributing to the growth rate. However, stiff competition and foreign exchange headwinds do not bode well for Charles River.
In the past year, this Zacks Rank #3 (Hold) stock has lost 2% compared with a 14.1% decline of the industry. However, the S&P 500 composite registered a 13.1% rise in the same time frame.
Operating as a full-service, early-stage contract research organization, Charles River has a market capitalization of $10.47 billion. The company has a long-term growth rate of 10.6% compared with the industry’s 13.5%.
Let’s delve deeper.
Growth Catalyst
RMS Business Rebounds: The RMS segment continues to benefit from broad-based growth in all geographic regions for small research models. Further, the company is showing strong growth within the end sourcing solutions business led by the CRADL operations or Charles River Accelerator and Development Labs initiative. Global biopharmaceutical companies, small and midsized biotechs and academic and government accounts significantly contributed to the growth rate. At the beginning of 2023, the company was facing a dull performance in China.
DSA Arm Continues to Thrive: Charles River is currently the largest provider of outsourced drug discovery, non-clinical development and regulated safety testing services worldwide. The company is gaining from its extensive expertise in discovering preclinical candidates and in the design, execution and reporting of safety assessment studies for numerous compounds, including cell and gene therapies and small and large-molecule pharmaceuticals.
Upbeat Guidance: For 2023, CRL’s revenue growth is now expected in the band of 2.5-4.5% (from the earlier band of 2-4.5%) on a reported basis. Organic revenue growth is expected to be 5.5-7.5% (5-7.5%). The Zacks Consensus Estimate for total revenues is pegged at $4.11 billion, indicating a 3.4% rise from 2022.
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Adjusted earnings per share for 2023 are now expected in the range of $10.30-$10.90 ($9.90-$10.90). The current Zacks Consensus Estimate is pegged at $10.33
Downsides
Foreign Exchange Translation Impacts Sales: Foreign exchange is a significant headwind for Charles River due to a considerable percentage of its revenues coming from outside the United States. The strengthening of the Euro and some other developed market currencies has constantly hampered the company’s performance in the international markets.
Competitive Landscape: Charles River competes in the marketplace based on its therapeutic and scientific expertise in early-stage drug research, quality, reputation, flexibility, responsiveness, pricing, innovation and global capabilities. The company primarily faces a broad range of competitors of different sizes and capabilities in its three business segments. For RMS, it has five main competitors: one is a government-funded, not-for-profit entity, one is privately held in Europe and three are privately held in the United States.
Estimate Trend
Charles River has been witnessing a positive estimate revision trend for 2023. The Zacks Consensus Estimate for its earnings has moved 1.6% north to $10.48 per share in the past 90 days.
The Zacks Consensus Estimate for CRL’s 2023 revenues is pegged at $4.12 billion, suggesting a 3.6% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Quanterix QTRX and SiBone SIBN. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Haemonetics’ stock has risen 19.9% in the past year. Earnings estimates for Haemonetics have increased from $3.56 to $3.74 in 2023 and $3.96 to $4.07 in 2024 in the past 30 days. It currently sports a Zacks Rank #1.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 19.39%. In the last reported quarter, it posted an earnings surprise of 38.16%.
Estimates for Quanterix’s 2023 loss per share have narrowed from $1.19 to 97 cents in the past 30 days. Shares of the company have increased 167.5% in the past year against the industry’s decline of 1.7%. It currently carries a Zacks Rank #2 (Buy).
QTRX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
Estimates for SiBone’s2023 loss have narrowed from $1.42 to $1.27 per share in the past 30 days. Shares of the company have increased 31% in the past year compared with the industry’s rise of 1.9%. It currently carries a Zacks Rank #2.
SIBN’s earnings beat estimates in all the trailing four quarters, the average surprise being 20.37%. In the last reported quarter, SiBone delivered an earnings surprise of 26.83%.
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Haemonetics Corporation (HAE) : Free Stock Analysis Report
Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report
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SiBone (SIBN) : Free Stock Analysis Report
