Yahoo Finance Charles River (CRL) Q1 Earnings Top Estimates, View Narrowed
Charles River Laboratories International, Inc. CRL reported adjusted earnings per share (EPS) of $2.78 for first-quarter 2023, reflecting a 1.1% rise from the year-ago earnings. The metric surpassed the Zacks Consensus Estimate by 7.3%.
The result was primarily driven by higher revenues and operating income, partially offset by increased interest expense and a higher tax rate, as well as the impact of the Avian Vaccine divestiture.
On a GAAP basis, earnings increased 11% year over year to $2.01 per share.
Revenues
Revenues in the first quarter totaled $1.03 billion, beating the Zacks Consensus Estimate by 4.1%. The top line improved 12.6% from the year-ago number (up 15.4% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Segment in Detail
Charles River’s first-quarter total Research Models and Services (RMS) revenues of $199.8 million were up 13.2% year over year (up 6.8% organically). Organic revenue growth was driven by broad-based growth for small research models, research model services, and the Cell Solutions business.
Discovery and Safety Assessment (DSA) revenues of $662.4 million rose 21.7% (up 23.6% organically). Organic revenue growth was mainly driven by broad-based growth in the Safety Assessment business on meaningful price increases and higher study volume.
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
Manufacturing Solutions revenues totaled $167.3 million, down 13.4% year over year (down 1.8% organically). The organic revenue decline was due to lower revenues in the CDMO business, which faced a challenging year-over-year comparison due to commercial readiness milestones in the first quarter of last year, and the Biologics Testing Solutions business, which experienced lower-than-anticipated testing volumes at the beginning of the year and a difficult comparison associated with last year’s COVID-related testing revenues. These werepartially offset by revenue growth in the Microbial Solutions business.
Margins
The gross profit in the reported quarter was $377.7 million, up 12.1% from the prior-year quarter. However, gross margin of 36.7% contracted 17 basis points (bps) year over year on a 12.9% rise in the total costs of the company.
Selling, general & administrative expenses rose 16.5% to $174.8 million.
Adjusted operating income totaled $202.8 million, reflecting an 8.6% rise from the prior-year quarter. The adjusted operating margin in the first quarter contracted 74 bps to 19.7%.
Liquidity and Cash Position
Charles River exited the first quarter with cash and cash equivalents of $201.6 million compared with $233.9 million at the end of 2022.
Cumulative net cash provided by operating activities at the end of the first quarter was $109.4 million compared with the prior-year quarter’s $102.6 million.
2023 Guidance
The company has narrowed its 2023 guidance.
For 2023, revenue growth is now expected in the band of 2-4.5% (from the earlier band of 1.5-4.5%) on a reported basis. Organic revenue growth is expected in the range of 5-7.5% (4.5-7.5%). The Zacks Consensus Estimate for total revenues is pegged at $4.08 billion, indicating a 2.7% rise from 2022.
Adjusted EPS for 2023 is now expected in the range of $9.90-$10.90 ($9.70-$10.90). The current Zacks Consensus Estimate is pegged at $10.18.
Our Take
Charles River exited the first quarter of 2022 with better-than-expected earnings and revenues. The results highlighted a more than 15% organic revenue growth, driven by strength across the DSA and RMS business segments. The company registered robust growth in small research models, research model services and the Cell Solutions business.
On the flip side, the contraction of both margins and escalating costs are concerning. Headwinds associated with foreign exchange due to the strengthening of the U.S. dollar and interest expense due to a rising interest rate environment increase concerns.
Zacks Rank and Key Picks
Charles River currently carries Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation EW, Intuitive Surgical, Inc. ISRG and Johnson & Johnson JNJ.
Edwards Lifesciences, carrying a Zacks Rank #2 (Buy), reported first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and came in line in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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