Spain’s credit rating upgraded to ’A+’ by S&P on strong growth
On Friday, Redburn-Atlantic made a bullish shift on Charles River Laboratories International Inc. (NYSE:CRL), upgrading the stock from Neutral to Buy, despite a slight reduction in the price target to $182 from the previous $188. The upgrade comes amid signs of improving demand in the company’s Discovery (NASDAQ:WBD) and Safety Assessment (DSA) business, which had seen year-over-year declines since the fourth quarter of 2023. This trend appeared to show initial signs of reversal in the first quarter of 2025. According to InvestingPro data, 12 analysts have recently revised their earnings estimates upward, suggesting growing confidence in the company’s recovery trajectory.
The presence of Elliott Management as Charles River Labs’ largest investor and the announcement of a comprehensive strategic review are seen as additional potential catalysts for the company’s future performance. Redburn-Atlantic analysts have increased their forecasts by approximately 7% and now stand 5-6% above the consensus estimates. With a solid Financial Health Score of "GOOD" from InvestingPro, the company appears well-positioned for its strategic initiatives.
The current valuation of Charles River Labs at 14 times its 2025 earnings represents a 36% discount compared to its ten-year average historical forward multiple of 22 times, and a similar discount to the S&P 500 index. The new price target of $182 is based on an 18 times multiple of the company’s non-GAAP 2025 estimated earnings per share (16 times the 2026 estimates), which is about half the current discount. This valuation is supported by Charles River Labs’ leading position in the market and its expected growth trajectory once demand normalizes.
The company’s free cash flow has remained strong, with a current free cash flow yield of 8%, compared to the historical average of 4.5%. This robust financial metric further underpins the positive outlook on the stock, as per the analyst’s comments. The company generated $563 million in levered free cash flow over the last twelve months, demonstrating solid operational efficiency despite market challenges.
In other recent news, Charles River Laboratories International Inc. reported its first-quarter 2025 earnings, exceeding analyst expectations with an earnings per share (EPS) of $2.34, compared to the forecasted $2.09. The company also surpassed revenue projections, reporting $984.2 million against the anticipated $941.47 million. Charles River Laboratories raised its full-year guidance, forecasting an EPS between $9.30 and $9.80. Deutsche Bank (ETR:DBKGn) analyst Justin Bowers raised the price target for Charles River to $180, up from $140, while maintaining a Buy rating, citing the company’s strategic realignment and positive future guidance. Evercore ISI analyst Elizabeth Anderson upgraded Charles River’s stock rating to Outperform, increasing the price target to $170 from $135, following a cooperation agreement with Elliott Management and improved bookings. This cooperation with Elliott Management is seen as a potential catalyst for enhancing shareholder value. Charles River’s strategic focus and recent developments have positioned it favorably, reflecting confidence in its growth potential.
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