Yahoo Finance Charles River (CRL) Q4 Earnings Top Estimates, Margins Dip
Charles River Laboratories International, Inc. CRL reported adjusted earnings per share (EPS) of $2.98 for fourth-quarter 2022, reflecting a 19.7% rise from the year-ago earnings. Nevertheless, the metric surpassed the Zacks Consensus Estimate by 8.4%.
In the quarter, lower operating margins, increased interest expenses and a higher tax rate impacted the bottom line.
On a GAAP basis, earnings increased 36.7% year over year to $3.65 per share.
For the full year, adjusted EPS were $11.12 per share, up 7.8% from the year-ago period’s levels. The figure lagged the Zacks Consensus Estimate by 3.5%.
Revenues
Revenues in the third quarter totaled $989.2 million, beating the Zacks Consensus Estimate by 1.1%. The top line improved 10.4% from the year-ago number (up 15.3% organically, excluding the impact of acquisition, divestiture and foreign currency translation).
Total revenues for 2022 were $3.98 billion, up 12.3% from the year-ago period’s levels. The figure lagged the Zacks Consensus Estimate by 8%.
Segment in Detail
Charles River’s fourth-quarter total Research Models and Services (RMS) revenues of $196.1 million were up 18.4% year over year (up 10.8% organically). Organic revenue growth was driven by robust demand for research model services, particularly the Insourcing Solutions (IS) business, as well as higher revenue for small research models in North America and China.
Discovery and Safety Assessment (DSA) revenues of $691.7 million rose 29.5% (up 26.5% 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 $212.1 million, up 3.3% year over year (up 5.3% organically). Organic revenue growth was fueled by robust demand in the Biologics Testing Solutions and Microbial Solutions businesses, partially offset by a revenue decline in the CDMO business.
Margins
The gross profit in the reported quarter was $398.8 million, up 14.9% from the prior-year quarter. However, the gross margin of 36% contracted 209 basis points (bps) year over year on a 25.6% rise in the total costs of the company.
Meanwhile, selling, general & administrative expenses rose 38.5% to $199.6 million.
Adjusted operating income totaled $199.2 million, reflecting a 1.9% drop from the prior-year quarter. The adjusted operating margin in the fourth quarter contracted 431 bps to 18.1%.
Liquidity and Cash Position
Charles River exited 2022 with cash and cash equivalents of $233.9 million compared with $241.2 million at the end of 2021.
Cumulative net cash provided by operating activities at the end of 2022 was $619.6 million compared with the prior-year quarter’s $760.8 million.
2023 Guidance
The company has provided its 2023 guidance.
For 2023, the revenue growth is expected in the band of 1.5-4.5% on a reported basis. Organic revenue growth is expected in the range of 4.5-7.5%. The Zacks Consensus Estimate for total revenues is pegged at $4.15 billion, indicating a 5.9% rise from 2022.
Adjusted EPS for 2023 is expected in the range of $9.70-$10.90. The current Zacks Consensus Estimate is pegged at $11.37.
Our Take
Charles River exited the fourth 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 Research Models and Services RMS business segments. The company registered robust demand in the Biologics Testing Solutions and Microbial Solutions businesses.
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 Cardinal Health, Inc. CAH, McKesson Corporation MCK and Hologic, Inc. HOLX.
Cardinal Health, carrying a Zacks Rank #2 (Buy), reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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