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Valued at a market cap of almost $7.7 billion, Charles River Laboratories International, Inc. (CRL) is a full service, early-stage contract research organization that provides drug discovery, non-clinical development, and safety testing services. Based in Wilmington, Massachusetts, the company provides essential products and services to help pharmaceutical and biotechnology companies, government agencies, and leading academic institutions accelerate their research and drug development efforts.
Companies worth $2 billion or more are typically classified as “mid-cap stocks,” and CRL fits the label perfectly, with its market cap exceeding this threshold, underscoring its size, influence, and dominance within the diagnostics & research industry. The company’s strength lies in its comprehensive service offering, providing end-to-end solutions across the entire drug development lifecycle, from discovery through preclinical and clinical stages. The company is particularly renowned for its expertise in preclinical services, including toxicology testing, pharmacology, and early-stage discovery.
Despite its notable strength, this healthcare company has slipped 44.9% from its 52-week high of $273.32, reached on Apr. 1, 2024. Moreover, it has fallen 19.1% over the past three months, underperforming the Health Care Select Sector SPDR Fund’s (XLV) 5.1% gain over the same time frame.
In the longer term, CRL has declined 44.5% over the past 52 weeks, considerably lagging behind XLV’s 1.2% downtick over the same time frame. Moreover, on a six-month basis, shares of CRL are down 24.1%, compared to XLV’s 4.6% loss.
To confirm its bearish trend, CRL has been trading below its 200-day moving average since late May, 2024, with some fluctuations. Moreover, it has remained below its 50-day moving average since mid-April, 2024, despite some fluctuations.
On Feb. 19, CRL released its better-than-expected Q4 results, and shares of the company soared 6.9%. Its adjusted earnings of $2.66 per share advanced 8.1% from the year-ago quarter and exceeded the forecasted figure by 6.4%. Meanwhile, its revenue declined 1.1% year-over-year to $1 billion, primarily due to lower revenue from its Discovery and Safety Assessment (DSA) segment. However, despite this decline, the top line figure exceeded Wall Street expectations. Adding to the positives, its adjusted operating margin increased to 19.9% from 19.1% recorded in the previous-year quarter, aided by higher revenue and operating income in the manufacturing segment as well as lower unallocated corporate costs. Additionally, reductions in the tax rate and interest expenses provided further support to the company's profitability.
CRL’s underperformance becomes less evident when compared to its rival, Medpace Holdings, Inc. (MEDP), which declined 24.6% over the past 52 weeks and 8.1% on a six-month basis.
Looking at CRL’s recent underperformance relative to its industry peers, analysts remain cautious about its prospects. The stock has a consensus rating of “Hold” from the 17 analysts covering it, and the mean price target of $178.87 suggests an 18.8% premium to its current levels.
