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On Thursday, Jefferies reaffirmed its Hold rating on Charles River Laboratories International Inc. (NYSE:CRL) with a steady price target of $169.00, close to the current trading price of $168.58. The company, with a market capitalization of $8.6 billion and annual revenue of $4.05 billion, has received mixed signals from analysts. According to InvestingPro data, 11 analysts have recently revised their earnings expectations downward for the upcoming period. The evaluation follows insights gathered from the Society of Toxicology (SOT) meeting, which highlighted three key themes affecting the industry. Analysts noted an uptick in pricing pressure, a slowdown in demand in the first quarter of 2025 compared to the fourth quarter of 2024, and increased risk associated with the National Institutes of Health (NIH) and government budgets.
The firm’s decision to attend the SOT conference was last-minute, and their representatives were possibly the only analysts present. During the event, Jefferies analysts engaged in informal conversations with Charles River Labs representatives, though not with senior management. These discussions, combined with multiple conversations with long-standing industry contacts, informed the firm’s perspective and led to the reaffirmation of the stock’s rating and price target.
The informal discussions at the SOT meeting did not yield numerical data but provided a qualitative sense of the industry’s direction. The conversations revealed a moderate increase in pricing pressure in the Discovery (NASDAQ:WBD) Services Area (DSA), a factor that could impact Charles River Labs’ financial model. Despite these challenges, InvestingPro analysis shows the company maintains a GOOD overall financial health score, with particularly strong marks in profitability metrics. Additionally, the analysts observed that demand, which appeared to be moderating in the first quarter of 2025, followed a stronger performance in the preceding quarter.
Further influencing the investment firm’s stance is the heightened budgetary risk from the NIH and government sources in the Research Model Services (RMS) sector. This concern reflects the potential volatility in funding that could affect Charles River Labs’ operations and financial outcomes.
In conclusion, Jefferies’ position on Charles River Labs remains unchanged following the SOT meeting. The Hold rating and $169.00 price target suggest a cautious outlook for the company’s stock, predicated on industry challenges and uncertainties in the current quarter and government funding prospects. While the stock currently trades at a notably high earnings multiple, InvestingPro analysis suggests the company is undervalued based on its Fair Value model. Investors seeking deeper insights can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, which includes detailed analysis of CRL’s valuation metrics, growth prospects, and industry positioning.
In other recent news, Charles River Laboratories reported its fourth-quarter earnings for 2024, exceeding analysts’ expectations with an earnings per share of $2.66, surpassing the forecasted $2.54. The company’s revenue also outperformed projections, reaching $1 billion compared to the anticipated $985.18 million. Despite a challenging year, Charles River Laboratories managed to maintain strong quarterly results, although full-year revenue declined by 11% to $578.5 million, and EBITDA fell by 23.6% to $104.9 million. The company is optimistic about its future, expecting revenues in the first quarter of 2025 to be similar to those of the same period in 2024, with an acceleration anticipated in the second quarter. Additionally, Charles River Laboratories aims to achieve mid-single-digit growth and return to a 19-20% EBITDA margin, focusing on expanding its presence in North America and pursuing mergers and acquisitions. In terms of market performance, the North American and Latin American markets showed notable revenue growth, contributing to the company’s stronger-than-expected results. The company’s CFO, Francesco, noted the challenges faced in 2024 but expressed optimism for future growth, particularly in the North American market.
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