Lab services company Charles River Laboratories (NYSE: CRL) reported Q1 CY2025 results exceeding the market’s revenue expectations, but sales fell by 2.7% year on year to $984.2 million. Its non-GAAP profit of $2.34 per share was 12.8% above analysts’ consensus estimates.
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Charles River Laboratories (CRL) Q1 CY2025 Highlights:
- Revenue: $984.2 million vs analyst estimates of $941.3 million (2.7% year-on-year decline, 4.6% beat)
- Adjusted EPS: $2.34 vs analyst estimates of $2.07 (12.8% beat)
- Adjusted EBITDA: $208.2 million vs analyst estimates of $216.5 million (21.2% margin, 3.9% miss)
- Management raised its full-year Adjusted EPS guidance to $9.55 at the midpoint, a 2.1% increase
- Operating Margin: 7.6%, down from 12.5% in the same quarter last year
- Free Cash Flow Margin: 11.4%, up from 5% in the same quarter last year
- Organic Revenue fell 1.8% year on year (-3.3% in the same quarter last year)
- Market Capitalization: $5.67 billion
James C. Foster, Chair, President and Chief Executive Officer, said, “The first quarter demonstrated continued signs of demand stabilization, highlighted by a notable improvement in DSA booking activity to the highest level in two years. This positive development was tempered by the general undertone of uncertainty in the broader market environment, which has led us to a balanced yet cautious view of the remainder of the year. Taking these factors into account, we are modestly increasing our financial guidance for 2025.”
Company Overview
Named after the Massachusetts river where it was founded in 1947, Charles River Laboratories (NYSE: CRL) provides non-clinical drug development services, research models, and manufacturing support to pharmaceutical and biotechnology companies.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Charles River Laboratories’s sales grew at a decent 8.1% compounded annual growth rate over the last five years. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.
Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Charles River Laboratories’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Charles River Laboratories’s organic revenue was flat. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results. 
This quarter, Charles River Laboratories’s revenue fell by 2.7% year on year to $984.2 million but beat Wall Street’s estimates by 4.6%.
Looking ahead, sell-side analysts expect revenue to decline by 4.2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Charles River Laboratories has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 13.2%, higher than the broader healthcare sector.
Analyzing the trend in its profitability, Charles River Laboratories’s operating margin decreased by 10.8 percentage points over the last five years. This performance was caused by more recent speed bumps as the company’s margin fell by 12 percentage points on a two-year basis. We’re disappointed in these results because it shows its expenses were rising and it couldn’t pass those costs onto its customers.
This quarter, Charles River Laboratories generated an operating profit margin of 7.6%, down 4.9 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
Charles River Laboratories’s solid 7.7% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
In Q1, Charles River Laboratories reported EPS at $2.34, up from $2.27 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Charles River Laboratories’s full-year EPS of $10.39 to shrink by 7.9%.
Key Takeaways from Charles River Laboratories’s Q1 Results
We were impressed by how significantly Charles River Laboratories blew past analysts’ organic revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates and that it raised its full-year EPS guidance. Zooming out, we think this was a solid print. The stock traded up 23.9% to $142.90 immediately following the results.
Charles River Laboratories had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
