Charles River Laboratories International Inc CRL reported fourth-quarter 2023 revenue of $1.01 billion, marking a 7.9% year-over-year decrease which still managed to surpass the consensus of $991.25 million.
The impact of foreign currency translation benefited reported revenue by 1.2%, while acquisitions contributed 0.7% to consolidated fourth-quarter revenue. Organic revenue, however, took a hit, declining by 3.5%.
Despite these numbers, the adjusted operating margin decreased to 19.1% from 20.4%, a cause for concern among analysts.
With adjusted net income at $127.2 million for the fourth quarter of 2023, a 16.8% from a year ago, the adjusted EPS of $2.46 was enough to surpass the consensus estimate of $2.40.
James Foster, Chairman, President and CEO, expressed his take on the fluctuations: “Despite moderating demand trends in the broader life sciences sector, we were able to deliver solid revenue growth and non-GAAP earning per share that were in the upper half of our original guidance ranges. We believe the current market environment is transitory.”
“We are anticipating that some level of constrained client spending will persist in 2024, but that demand will stabilize over the course of the year,” Foster added, attempting to alleviate concerns regarding the future.
Guidance: Charles River forecasts a fiscal year 2024 adjusted EPS of $10.90 to $11.40, versus a consensus expectation of $10.87.
The company anticipates 2024 revenue growth of 1.0%–4.0% on a reported basis, with an organic growth of 0.0%–3.0%.
William Blair wrote that the fourth quarter performance is seen as a mixed outcome. The analyst maintains the Outperform rating on Charles River Laboratories.
While there is positive news with a top-line beat, attention is expected to shift during the upcoming call to factors contributing to a somewhat disappointing revenue outlook for the year, which falls below the targeted 4% growth. Concerns are also raised about increased DSA cancellations observed in the fourth quarter.
Although the adjusted EPS guidance for 2024 seems favorable initially, a significant portion of the expected increase comes from Charles River’s enhanced ownership stake in Noveprim.
Price Action: CRL shares are up 9.01% at $240.09 on the last check Wednesday.
Photo via Wikimedia Commons
