Charles River Earnings: Cautious Client Spending Affects Near Term but Long-Term Outlook Positive

Narrow-moat Charles River Laboratories has continued to experience pressure from cautious client spending amid macroeconomic challenges. First-quarter revenue was $1.01 billion, a decrease of 1.7% from $1.03 billion in the prior year period. However, there are signs that market trends are stabilizing. According to BioWorld, biotech funding increased to $47.1 billion in the first quarter, more than tripling year over year. The improved funding should lead to additional spending on early-stage programs. We like that Charles River experienced increased proposal activity in the first quarter, and we appreciate that the company has available capacity to start various projects relatively quickly. We maintain our fair value estimate of $260 per share, and shares are currently in trading in 3-star territory, about 12% below our fair value estimate.