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Charles River (CRL) to Report Q4 Earnings: What's in Store?

Charles River Laboratories International, Inc. CRL is expected to report fourth-quarter 2022 results soon.

In the last reported quarter, the company’s adjusted earnings per share of $2.63 surpassed the Zacks Consensus Estimate by 4.78%. Earnings surpassed estimates in each of the trailing four quarters, the average beat being 2.56%.

Let’s take a look at how things have shaped up prior to this announcement.

Factors at Play

The Research Models and Services (RMS) segment is likely to have gained from continued global demand for research models and associated services. The company’s ongoing initiatives to boost operating performances by HemaCare and Cellero are anticipated to have had a beneficial impact on the cell supply business.

The ongoing broad-based demand and meaningful price increases in the Research Model business, particularly in North America, as well as Global Research Models Services, particularly Insourcing Solutions and GEMS, driven by increased research activities in this geography are expected to have contributed to the top line in Q4. However, an adverse impact related to China's COVID restrictions through the months of Q4 is likely to have disrupted RMS revenues.

Charles River Laboratories International, Inc. Price and EPS Surprise

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

Charles River Laboratories International, Inc. price-eps-surprise | Charles River Laboratories International, Inc. Quote

Meanwhile, the company’s CRADLE or Charles River Accelerator and Development Labs initiative including the recent Explora acquisition is anticipated to have maintained its growth momentum in Q4, benefiting the in-sourcing solutions business within the RMS arm. Further, the renewed focus on biomedical research has also led to increased demand and share gains for small research models, particularly in North America and China. This might have also contributed to the company’s RMS revenue growth in Q4. Charles River is also expected to have benefited in Q4 from price increases, which partially offset inflationary cost pressure.

The Discovery and Safety Assessment (DSA) arm is likely to have benefited from a strong biotechnology client base and robust backlog at the end of 2021. In the last reported quarter, The DSA growth rate surpassed the 20% level, in line with the company’s initial forecast of meaningful DSA growth acceleration throughout the year 2022. The ongoing demand, the company’s competitive strengths and the geographic reach of the portfolio within the DSA arm are expected to have once again led to significant revenue growth in Q4 as well.

Further, amid the staffing shortage issue, Charles River expects recent hires to help the company meet the accelerating DSA growth outlook over the course of 2022. This should get reflected in the Q4 results.

Within the DSA arm, the Safety Assessment business has been witnessing strong demand and price increases. The company expects growth in this business, banking on strong business trends with higher pricing and increased demand for the Safety Assessment line.

The Discovery business is likely to have gained from continued strong performances by early discovery and CNS services. Of late, Charles River has been witnessing growing client interest in integrated drug discovery programs. To meet the robust client demand for Discovery Services, the company has been closely managing staffing levels and introducing cutting-edge capabilities. The company has also been consistently expanding its discovery portfolio through strategic partnerships and acquisitions. We expect these ongoing business trends and initiatives to have fueled growth during the fourth quarter.

The Manufacturing Support segment is likely to have been driven by revenue growth across the Microbial Solutions and Biologics Testing Solutions businesses. The company has been recording strong demand across its portfolio of critical quality control testing solutions within the Microbial Solutions business. Meanwhile, we anticipate the continued uptake of cell and gene therapy testing services for the Biologics Testing Solutions business to have driven revenues in the to-be-reported quarter.

Q4 Estimates

The Zacks Consensus Estimate for the company’s fourth-quarter 2022 revenues is pegged at $1.04 billion, suggesting a 15.2% rise over the year-ago reported figure.

The Zacks Consensus Estimate for the company’s fourth-quarter 2022 earnings per share of $2.75 indicates a 10.4% rise from the year-ago reported figure.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here, as you can see:

Earnings ESP: The company has an Earnings ESP of +0.57%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Cardinal Health CAH has an Earnings ESP of +5.75% and a Zacks Rank of #2. The company will release fourth-quarter 2022 results on Feb 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health has a long-term expected earnings growth rate of 11.7%. Cardinal Health’s earnings yield of 6.87% compares favorably with the industry’s 4.34%.

Hologic HOLX has an Earnings ESP of +6.37% and a Zacks Rank of #2. Hologic is scheduled to release first-quarter fiscal 2023 results on Feb 1.

Hologic’s long-term historical earnings growth rate is estimated to be 23.4%. Hologic’s earnings yield of 4.35% compares favorably with the industry’s -6.74%.

Laboratory Corporation of America Holdings or LabCorp LH currently has an Earnings ESP of +2.67% and has a Zacks Rank of #2. LabCorp is scheduled to release fourth-quarter 2022 results on Feb 16.

LabCorp’s long-term historical earnings growth rate is estimated at 26.1%. LabCorp’s earnings yield of 7.02% compares favorably with the industry’s 4.34%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report

Cardinal Health, Inc. (CAH) : Free Stock Analysis Report

Hologic, Inc. (HOLX) : Free Stock Analysis Report

Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report

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