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Category: Stock Market and Charles River Labs
Date: 9 May 2020 Stock Price: $73.46 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Charles River Laboratories that provides products and services that assists pharmaceutical and biotech companies, governments and leading academic institutions
As the global COVID-19 pandemic intensified during the first quarter, we moved swiftly to mitigate the anticipated impact, which will be most pronounced in the research models business" |
About Charles River Laboratories
Charles River provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions around the globe accelerate their research and drug development efforts. Our dedicated employees are focused on providing clients with exactly what they need to improve and expedite the discovery, early-stage development and safe manufacture of new therapies for the patients who need them.
Overview of Charles River Laboratories 1st quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise
- Total Revenues: $707.059 million (up from $604.069 million from the same quarter of the previous year)
- Revenue increased by 17% over the last 12 months
- Operating expenses: $612.778 million (up from $534.777 million for the same quarter of the previous year)
- Operating expenses increased by 14.6% over the last 12 months
- Some margin gain for Charles River with their revenues growing at a faster rate than their operating costs
- Net earnings: $50.769 million (down from $55.133 million for the same quarter of the previous year)
- Diluted earnings per share: $1.02 (down from $.11 for the same quarter of the previous year)
- PE ratio of : 18
- Diluted weighted-average shares outstanding: 49.996 million (up from 49.462 million for the same quarter of the previous year)
- Cash and cash equivalents: $372,433 million
- Cash and cash equivalents per share: $7.44
- Cash and cash equivalents makes up 10,4% of Charles River market capital
- Cash and cash equivalents makes up 7.2% of Charles River total assets
- Inventories of Charles River: $162.983 million
- Inventories makes up 3.1% of Charles River total assets
- Trade receivables: $542.390 million
- Trade receivable makes up 10.4% of Charles River total assets
- Stockholders equity in Charles River: $1.655 billion
- Stockholders equity per share in Charles River: $33.10
- Charles River is trading at 2.21 times its stockholders equity per share which within the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.34. Read more about the S&P500 here.
- Cash generated from operations: $68.590 million
- Cash generated from operations per share: $1.37
Charles River's management commentary on their 1st quarter 2020 earnings report
WILMINGTON, Mass.--(BUSINESS WIRE)--May 7, 2020-- Charles River Laboratories International, Inc. (NYSE: CRL) today reported its results for the first quarter of 2020. For the quarter, revenue was $707.1 million, an increase of 17.0% from $604.6 million in the first quarter of 2019.
James C. Foster, Chairman, President and Chief Executive Officer, said, “As a result of robust client order activity, a strong biotech funding environment, and the dedication of our employees, Charles River had an exceptional start to the year. As the global COVID-19 pandemic intensified during the first quarter, we moved swiftly to mitigate the anticipated impact, which will be most pronounced in the research models business. We implemented measures that are focused on maintaining the health and safety of our employees and the continuity of our operations; sustaining our solid financial position; and ensuring our ability to support our clients’ critical programs. As a result of these measures, all of our operating sites have remained open and adequately staffed to accommodate significant client demand across most of our businesses.”
James C. Foster, Chairman, President and Chief Executive Officer, said, “As a result of robust client order activity, a strong biotech funding environment, and the dedication of our employees, Charles River had an exceptional start to the year. As the global COVID-19 pandemic intensified during the first quarter, we moved swiftly to mitigate the anticipated impact, which will be most pronounced in the research models business. We implemented measures that are focused on maintaining the health and safety of our employees and the continuity of our operations; sustaining our solid financial position; and ensuring our ability to support our clients’ critical programs. As a result of these measures, all of our operating sites have remained open and adequately staffed to accommodate significant client demand across most of our businesses.”
Mr. Foster continued, “We believe the long-term growth prospects for the Company remain firmly intact. The healthcare industry will play a crucial role in finding a solution to the COVID-19 pandemic, which will enhance the focus on scientific innovation for years to come. We believe our unique position in healthcare, specifically our non-clinical focus, global scale, and scientific expertise, is critical in helping our clients develop treatments for COVID-19 and other diseases across multiple therapeutic areas. We have partnered with more than 40 clients to-date on their development programs for potential vaccine candidates and other treatments associated with COVID-19. Our value is being reinforced during these challenging times, as clients are choosing to outsource more work to us to take advantage of our broad portfolio and flexible, efficient solutions, which enable them to continue the research required to move all of their early-stage programs forward. We believe our ability to provide support to clients globally during this time further distinguishes us as the early-stage CRO partner of choice, which we are proud to be.”
“I am deeply grateful for the hard work and unwavering commitment of our employees who make our contributions to this important research possible. Their dedication allows us to continue to fulfill our mission every day,” Mr. Foster concluded.
2020 Guidance
Due to the global COVID-19 pandemic and its expected impact on the Company’s operations, client demand, and its financial results, Charles River is revising its financial guidance for 2020, which was initially provided on February 11, 2020. The impact from the COVID-19 pandemic is expected to reduce 2020 revenue by approximately $135 to $215 million. COVID-19 will have a significant impact on the RMS revenue growth rate in 2020, particularly in the second quarter, and is also expected to modestly reduce the DSA and Manufacturing revenue growth rates.
The Company’s revised guidance for revenue growth, earnings per share, and free cash flow is as follows:
2020 GUIDANCE CURRENT PRIOR
Revenue growth, reported: 4.5% – 8.0% 13.0% – 14.5%
Less: Contribution from acquisitions : ~(4.0%) (4.0%) – (4.5%)
Unfavorable/(favorable) impact of foreign exchange 0.5% – 1.0% (1.0%) – (1.5%)
Revenue growth, organic: 1.5% – 4.5% 7.75% – 8.75%
GAAP EPS estimate: $4.25 – $4.60 $5.20 – $5.35
Acquisition-related amortization : $1.75 – $1.80 $1.65 – $1.70
Charges related to global efficiency initiatives: ~$0.05 <$0.05
Acquisition-related adjustments: ~$0.20 $0.25
Other items: $0.25 – $0.32 $0.25 – $0.32
Venture capital investment losses/(gains) : $0.18
Non-GAAP EPS estimate $6.75 – $7.10 $7.45 – $7.60
Free cash flow: $325 – $350 million $350 – $360 million
“I am deeply grateful for the hard work and unwavering commitment of our employees who make our contributions to this important research possible. Their dedication allows us to continue to fulfill our mission every day,” Mr. Foster concluded.
2020 Guidance
Due to the global COVID-19 pandemic and its expected impact on the Company’s operations, client demand, and its financial results, Charles River is revising its financial guidance for 2020, which was initially provided on February 11, 2020. The impact from the COVID-19 pandemic is expected to reduce 2020 revenue by approximately $135 to $215 million. COVID-19 will have a significant impact on the RMS revenue growth rate in 2020, particularly in the second quarter, and is also expected to modestly reduce the DSA and Manufacturing revenue growth rates.
The Company’s revised guidance for revenue growth, earnings per share, and free cash flow is as follows:
2020 GUIDANCE CURRENT PRIOR
Revenue growth, reported: 4.5% – 8.0% 13.0% – 14.5%
Less: Contribution from acquisitions : ~(4.0%) (4.0%) – (4.5%)
Unfavorable/(favorable) impact of foreign exchange 0.5% – 1.0% (1.0%) – (1.5%)
Revenue growth, organic: 1.5% – 4.5% 7.75% – 8.75%
GAAP EPS estimate: $4.25 – $4.60 $5.20 – $5.35
Acquisition-related amortization : $1.75 – $1.80 $1.65 – $1.70
Charges related to global efficiency initiatives: ~$0.05 <$0.05
Acquisition-related adjustments: ~$0.20 $0.25
Other items: $0.25 – $0.32 $0.25 – $0.32
Venture capital investment losses/(gains) : $0.18
Non-GAAP EPS estimate $6.75 – $7.10 $7.45 – $7.60
Free cash flow: $325 – $350 million $350 – $360 million
Charles River Laboratories (NYSE: CRL) stock price history
The image below, obtained from Google, shows the stock price history of Charles River Laboratories (NYSE: CRL) over the last 5 years. And it's been a pretty good time for Charles River Laboratories stockholders. 5 years ago the stock of Charles River Laboratories was trading at around $71 a stock and its currently trading at $159.56. That's a strong return of 124.7% provided to Charles River Laboratories stockholders over the last 5 years.
Charles River stock is trading at very close to its 52 week high of $179.38 and far away from its 52 week low of $95.58 which to us is a clear indication that the short term sentiment and momentum of Charles River stock is very positive at this point in time.
Charles River stock is trading at very close to its 52 week high of $179.38 and far away from its 52 week low of $95.58 which to us is a clear indication that the short term sentiment and momentum of Charles River stock is very positive at this point in time.
Recent Google search trends for CRL stock price
The graphic below shows the Google search trends for CRL stock price over the last 12 months in the United States. As it shows there isn't really a lot of interest in this company's stock price as the searches are rather erratic
Recent coverage of Charles River
The extract below shows recent coverage of Charles River as obtained from Finance.yahoo.com
Charles River Laboratories (CRL) came out with quarterly earnings of $1.84 per share, beating the Zacks Consensus Estimate of $1.48 per share. This compares to earnings of $1.40 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 24.32%. A quarter ago, it was expected that this medical research equipment and services provider would post earnings of $1.83 per share when it actually produced earnings of $2.01, delivering a surprise of 9.84%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Charles River, which belongs to the Zacks Medical Services industry, posted revenues of $707.06 million for the quarter ended March 2020, surpassing the Zacks Consensus Estimate by 2.07%. This compares to year-ago revenues of $604.57 million. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Charles River shares have lost about 6% since the beginning of the year versus the S&P 500's decline of -11.8%.
Read the full article here
Charles River Laboratories (CRL) came out with quarterly earnings of $1.84 per share, beating the Zacks Consensus Estimate of $1.48 per share. This compares to earnings of $1.40 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of 24.32%. A quarter ago, it was expected that this medical research equipment and services provider would post earnings of $1.83 per share when it actually produced earnings of $2.01, delivering a surprise of 9.84%.
Over the last four quarters, the company has surpassed consensus EPS estimates four times. Charles River, which belongs to the Zacks Medical Services industry, posted revenues of $707.06 million for the quarter ended March 2020, surpassing the Zacks Consensus Estimate by 2.07%. This compares to year-ago revenues of $604.57 million. The company has topped consensus revenue estimates two times over the last four quarters.
The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Charles River shares have lost about 6% since the beginning of the year versus the S&P 500's decline of -11.8%.
Read the full article here
Charles River (NYSE: CRL) latest stock valuation
So based on Charles River 1st quarter 2020 earnings report and their fiscal guidance/ outlook provide what do we value Charles River stock at? Based on their earnings reported our valuation model provides a target price (full value price) for Charles River Laboratories at $151.30 per stock
We therefore believe that the stock of Charles Rivers stock is fully valued. W usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $151.30. A good entry price into Charles River stock would therefore be at $136.20 or below.
We expect the stock of Charles River Laboratories to trade in a narrow range around its current price in coming weeks and months.
We therefore believe that the stock of Charles Rivers stock is fully valued. W usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $151.30. A good entry price into Charles River stock would therefore be at $136.20 or below.
We expect the stock of Charles River Laboratories to trade in a narrow range around its current price in coming weeks and months.
Next earnings release of Charles River Laboratories
It is expected that Charles River will release their 2nd quarter 2020 earnings release in early August 2020