Is it Prudent to Retain Charles River Stock in Your Portfolio Now?

Charles River Laboratories International, Inc. CRL expands its products and services across the drug discovery and early-stage development continuum through targeted partnerships and acquisitions. Signs of stabilization and improved bookings in the Discovery and Safety Assessment (“DSA”) segment are encouraging. Yet, the adverse macroeconomic impacts and currency woes pose risks for the company’s operations.

Year to date, this Zacks Rank #3 (Hold) company’s shares have lost 16.4% compared with the industry’s 4.2% decline. However, the S&P 500 composite has risen 6% during the same period.

The renowned, non-clinical global drug development company has a market capitalization of $7.76 billion. Charles River has an earnings yield of 6% compared with the industry’s 4.1%. It beat on earnings in each of the trailing four quarters, delivering an average surprise of 10.9%.

Let’s delve deeper.

Upsides for CRL Stock

DSA, A Potential Growth Driver: Charles River is the largest provider of outsourced drug discovery, non-clinical development and regulated safety testing services worldwide. The company is gaining from its extensive expertise in the discovery of preclinical candidates and in the design, execution and reporting of safety assessment studies for numerous types of compounds, including cell and gene therapies and small and large molecule pharmaceuticals.

Amid broader economic uncertainty, Charles River saw signs of stabilization in the first quarter of 2025, with a better-than-expected DSA performance. DSA’s net book-to-bill rose above 1X for the first time in more than two years due to improved quarterly bookings. The company now expects the segment to deliver incremental revenues in 2025, particularly during the first half, reflecting this positive development.

Strategic Deals Drive Growth: Charles River expands the scope of its products and services across the drug discovery and early-stage development continuum through targeted partnerships and strategic acquisitions. During the first quarter of 2025, the company partnered with Akron Bio to enhance its operations by integrating CGMP materials into the cell therapy platform. Charles River extended its global partnership with Deciphex to expand its digital pathology offering with exclusive image management solutions.

It joined forces with H. Lundbeck A/S (Lundbeck) to use their AI-powered end-to-end drug discovery solution to advance brain disease research. Additionally, CRL collaborated with the FOXG1 Research Foundation to advance its gene therapy through clinical trials. Furthermore, a collaboration with Autobahn Labs established Charles River as the preferred research partner to support the former's growing pipeline of early-stage, preclinical therapeutics programs.

Downsides for CRL Stock

Macroeconomic Condition: Charles River is experiencing a cautious spending environment, particularly among its global biopharmaceutical and biotechnology clients within the DSA segment. RMS generates a portion of its revenues from academic institutions and research laboratories that depend on funding from agencies like the U.S. National Institutes of Health (“NIH”). A recent NIH policy, which significantly reduces research grants by limiting payments for indirect overhead, has created a risk of delayed client purchasing decisions and may adversely impact Charles River’s financial results. On a broader macroeconomic level, the company is now subject to tariffs on imports from its major supplier countries such as Vietnam, Mauritius and China.

Foreign Exchange Translation Impacts Sales: Foreign exchange is a major headwind for Charles River as a considerable percentage of its revenues comes from outside the United States. While the company reports in U.S. dollars, its subsidiaries conduct business in various currencies, including the Euro, British Pound, Canadian Dollar and Mauritian Rupee. The strengthening of the U.S. dollar in recent months has further intensified foreign exchange headwinds.

CRL Stock Estimate Trend

The Zacks Consensus Estimate for 2025 earnings has remained unchanged at $9.62 per share in the past 30 days.

The Zacks Consensus Estimate for 2025 revenues is pegged at $3.89 billion, suggesting a 3.9% decrease from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Align Technology ALGN, Abbott Laboratories ABT and Cencora COR.

Align Technology has an estimated long-term earnings growth rate of 11.2% compared with the industry’s 9.9%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.4%. Its shares have lost 27.7% compared with the industry’s 3.3% decline in the past year.

ALGN carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Abbott, currently carrying a Zacks Rank #2, has an earnings yield of 3.8% compared with the industry’s 0.6%. Shares of the company have surged 129.7% compared with the industry’s 35.9% gain. ABT’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 1.6%.

Cencora, carrying a Zacks Rank #2 at present, has an earnings yield of 5.4% compared with the industry’s 3.8%. Shares of the company have rallied 25.9% against the industry’s 14.4% decline. COR’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6%.

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This article originally published on Zacks Investment Research (zacks.com).

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