TD Cowen cautious on Charles River Labs stock as 2025 guide signals further declines

On Tuesday, TD Cowen reaffirmed its Hold rating on Charles River Laboratories International Inc. (NYSE: CRL) shares, with a price target of $227.00. Currently trading at $178.02, the stock is near its 52-week low, as revealed by InvestingPro data. The firm's analysis suggests that the company's preliminary guidance for the year 2025 indicates potential ongoing challenges.

Charles River Labs (NYSE:CRL) anticipates a decline in revenue due to a variety of factors, including pricing dynamics in Discovery (NASDAQ:WBD) Services Agreement (DSA), consistent demand levels, the impact of site consolidation, the loss of a contract development and manufacturing organization (CDMO) commercial client, and a deceleration in CDMO demand.

According to the firm, these factors are expected to contribute to a modest year-over-year decrease in operating margins for Charles River Labs. This financial outlook suggests that a recovery for the company may be delayed until 2026. The analyst's commentary reflects concerns that the company may be further from a financial turnaround than previously anticipated.

Charles River Labs specializes in a range of preclinical and clinical laboratory services for the pharmaceutical, medical device, and biotechnology industries. The company's services are critical for drug discovery and development processes.

While maintaining a GOOD Financial Health Score according to InvestingPro analysis, with a P/E ratio of 23.67 and revenue decline of 3.67% in the last twelve months, the current assessment by TD Cowen indicates that despite stable demand, the company is facing pricing and operational challenges that could affect its performance in the near term.

The loss of a CDMO commercial client and slower demand in that segment pose particular concerns for the company's revenue streams. Site consolidation actions, while potentially beneficial in the long run, may also contribute to the near-term financial pressures faced by Charles River Labs.

The reiterated Hold rating and $227.00 price target from TD Cowen reflect a cautious outlook on the company's stock, as analysts await clearer signs of a financial recovery. According to InvestingPro analysis, the stock appears undervalued at current levels, with additional insights available in the comprehensive Pro Research Report.

Investors and stakeholders in Charles River Labs will be monitoring the company's progress closely as it navigates the challenges outlined in its 2025 preliminary guidance, with the next earnings announcement scheduled for February 12, 2025.

In other recent news, Charles River Laboratories has been in the spotlight due to its financial performance and outlook.

The company recently issued a preliminary forecast for fiscal year 2025, indicating continued sales challenges with an anticipated revenue drop of 4.5%, equating to approximately $3.85 billion in sales. This falls short of consensus estimates of $4.07 billion by 5.5%. The adjusted earnings per share are projected to be around $9.50, as opposed to the Street's expectation of approximately $10.20.

Despite these challenges, Charles River Laboratories maintains a "GOOD" overall financial health score, with strong profitability metrics. BofA Securities and Baird have maintained a Neutral rating on the company's stock, with BofA setting a price target of $210 and Baird reducing its target to $197 from $211. TD Cowen also held a Hold rating but increased the price target to $227 from $203, following the company's third-quarter results.

These recent developments reflect analysts' cautious optimism about Charles River Laboratories' near-term prospects despite the expected revenue decline. The company is focusing on cost management and capital deployment in the short term.

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