Charles River Laboratories’ second quarter results were met with a significant negative market reaction, despite the company’s revenue and non-GAAP profit both topping Wall Street expectations. Management attributed the quarterly outperformance primarily to stronger-than-anticipated activity in its Discovery and Safety Assessment (DSA) business, driven by bookings strength from the prior quarter and favorable foreign exchange movements. CEO James Foster highlighted stabilization in the demand environment, noting that “global biopharmaceutical demand trends appear to have bottomed, and we believe they are beginning to slowly move upward.” However, the company acknowledged that operating margin contraction and persistent uncertainties in biotech funding and client spending patterns remain ongoing challenges.
Is now the time to buy CRL? Find out in our full research report (it’s free).
Charles River Laboratories (CRL) Q2 CY2025 Highlights:
- Revenue: $1.03 billion vs analyst estimates of $986.9 million (flat year on year, 4.6% beat)
- Adjusted EPS: $3.12 vs analyst estimates of $2.50 (24.6% beat)
- Adjusted EBITDA: $272.5 million vs analyst estimates of $241.5 million (26.4% margin, 12.8% beat)
- Management raised its full-year Adjusted EPS guidance to $10.10 at the midpoint, a 5.8% increase
- Operating Margin: 9.7%, down from 14.8% in the same quarter last year
- Organic Revenue was flat year on year vs analyst estimates of 3.6% declines (305.9 basis point beat)
- Market Capitalization: $7.52 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Charles River Laboratories’s Q2 Earnings Call
- Elizabeth Anderson (Evercore ISI) asked about the stability of demand and the outlook for bookings. CEO James Foster confirmed “stabilization across all client bases,” with pharma appearing stronger and small biotechs still facing funding constraints.
- Eric Coldwell (Baird) inquired about the CDMO segment’s strong margins and the operational impact of regulatory clearance for nonhuman primate (NHP) shipments. CFO Flavia Pease clarified that the CDMO margin benefit was temporary and Foster said the NHP clearance increases operational flexibility moving forward.
- David Windley (Jefferies) questioned how cancellation rates and backlog conversion would affect near-term revenue. Foster stated that backlog duration of about 10 months is “robust,” and allows the company to keep staff busy even with cancellations.
- Patrick Donnelly (Citi) asked about hiring confidence and implications for DSA growth next year. Foster said hiring was measured to match current demand, and future growth depends on capital market conditions for smaller biotech clients.
- Charles Rhyee (TD Cowen) sought clarification on margin headwinds in the second half. Pease outlined that the main factors were increased DSA hiring, normalization of CDMO margins, and annual merit salary increases.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be watching (1) whether DSA segment demand continues its upward trajectory and bookings stabilize, (2) the impact of margin headwinds from cost structure changes, especially as temporary CDMO revenue rolls off, and (3) ongoing progress in expanding the NAMs portfolio. Additionally, clarity on regulatory risks and biotech funding trends will be important markers for sustained recovery.
Charles River Laboratories currently trades at $152.75, down from $167.49 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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