Charles River Laboratories International Inc. (CRL) recently reaffirmed its guidance for 2012 and provided its outlook for 2013.
Although Charles River maintained its 2012 adjusted earnings guidance ($2.68–$2.73 per share), the company noted that it expects earnings to come between the low and the mid-point of the projected range. The Zacks Consensus Estimate of $2.73 per share is at the high end of the company’s guidance range.
Charles River also maintained its 2012 net sales guidance. The company continues to expect foreign exchange translations to negatively impact sales by 2%. Sales for the year are expected to decline 1% year over year. Charles River’s 2012 sales growth guidance is above the Zacks Consensus Estimate of $1.13 billion, which represents a decline of 0.8% from the year ago period.
In Line 2013 Revenue Guidance
Although Charles River maintained its 2012 adjusted earnings guidance ($2.68–$2.73 per share), the company noted that it expects earnings to come between the low and the mid-point of the projected range. The Zacks Consensus Estimate of $2.73 per share is at the high end of the company’s guidance range.
Charles River also maintained its 2012 net sales guidance. The company continues to expect foreign exchange translations to negatively impact sales by 2%. Sales for the year are expected to decline 1% year over year. Charles River’s 2012 sales growth guidance is above the Zacks Consensus Estimate of $1.13 billion, which represents a decline of 0.8% from the year ago period.
Meanwhile, Charles River’s 2013 adjusted earnings guidance of $2.80–$2.90 per share was below the current Zacks Consensus Estimate of $3.01 per share. The company mentioned that its 2013 guidance does not include the impact of the Vital River acquisition, which is scheduled to close in the first quarter of 2013.
Charles Riveris expecting a slower start to 2013 as far as earnings per share are concerned, due to restricted spending by clients. The company expects its first quarter 2013 earnings to be at par with the year-ago number.
The company is currently running a Profit Improvement Program, under which it will restrict its capital expenditure to around $50 million per year. Charles River expects to save over $25 million in 2012 and another $20 million in 2013.
The company signed several acquisition and partnership agreements in the last few years, including a partnership deal with AstraZeneca plc (AZN) in October this year. Charles River is currently in talks with several large biopharma companies and expects to convert a few of these discussions into deals next year. These deals will support growth in 2013.
The company expects to buy back 1–1.5 million shares in 2013. The company had around 73.5 million outstanding shares under its current stock repurchase authorization at the end of the third quarter of 2013.
Our Take
Charles River’s earnings guidance for 2013 was well below expectations even though revenue guidance was in-line with expectations. Operating margin is expected to remain at the same level as in 2012. Shares were down more than 9% following the release of 2013 outlook. With the company guiding below expectations, we expect downward revisions in estimates in the next few days.
We currently have a Neutral recommendation on Charles River. The stock carries a Zacks #3 Rank, which translates into a short-term Hold rating.
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