Wells Fargo Resumes Coverage on Charles River Labs (CRL) at Market Perform
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Price: $280.05 -0.43%
Rating Summary:
23 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
23 Buy, 6 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Wells Fargo resumes coverage on Charles River Labs (NYSE: CRL) with a Market Perform. PT range $30-$32.
Wells analyst says, "We like the strong free cash flow (FCF) generated by CRL's stable and high margin Research Models & Services (RMS) segment, but our primary concern is how the company chooses to reinvest that cash as CRL has the poorest return on invested capital (ROIC) track record among its peers. We believe misallocated capital over the past decade is the primary reason for CRL's sluggish stock price performance. Recently, the default uses for cash have been to repurchase shares and to deleverage the balance sheet. While financial engineering has a place, we would also like to see the company find high-return investments to build the business. As it currently stands, we see little upside potential to consensus estimates. RMS has good visibility but is a slow-growth segment already near peak margin. We believe improvement in the Preclinical Services (PCS) segment will be slow and steady, a view seemingly reflected in consensus...Our 2011 and 2012 EPS estimates are $2.44 and $2.66, respectively."
For more ratings news on Charles River Labs click here and for the rating history of Charles River Labs click here.
Shares of Charles River Labs closed at $30.00 yesterday.
Wells analyst says, "We like the strong free cash flow (FCF) generated by CRL's stable and high margin Research Models & Services (RMS) segment, but our primary concern is how the company chooses to reinvest that cash as CRL has the poorest return on invested capital (ROIC) track record among its peers. We believe misallocated capital over the past decade is the primary reason for CRL's sluggish stock price performance. Recently, the default uses for cash have been to repurchase shares and to deleverage the balance sheet. While financial engineering has a place, we would also like to see the company find high-return investments to build the business. As it currently stands, we see little upside potential to consensus estimates. RMS has good visibility but is a slow-growth segment already near peak margin. We believe improvement in the Preclinical Services (PCS) segment will be slow and steady, a view seemingly reflected in consensus...Our 2011 and 2012 EPS estimates are $2.44 and $2.66, respectively."
For more ratings news on Charles River Labs click here and for the rating history of Charles River Labs click here.
Shares of Charles River Labs closed at $30.00 yesterday.
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