Charles River Labs (CRL) PT Raised to $300 at Evercore ISI

Evercore ISI analyst Elizabeth Anderson raised the price target on Charles River Labs (NYSE: CRL) to $300.00 (from $265.00) while maintaining a Outperform rating.

The analyst comments "Investors have been worried about the steepness of CRL’s EPS ramp across 2024. Over the past few weeks we have become more constructive on both biotech and pharma end market demand, which should start to feed into improved bookings as well as revenues potentially as early as 2Q, and helping to support this improving financial outlook. In addition, we see consensus as mis-modeling the profitability of Manufacturing, particularly as the CDMO business continues to recover. As many investors are undoubtedly familiar with, Manufacturing (~17% of 2023 revenue) consists of three distinct businesses with different profitability profiles (see below). While all three (biologics, microbial, and the CDMO) have all experienced volatile demand across 2023, we see 10% upside to 2024 Manufacturing AOI vs. consensus given that incremental margins are likely well over 100% as the business continues to recover. This upside translates to ~34c of EPS, and provides greater confidence in the achievability of the midpoint of the company’s 2024 guidance, with further upside possible as the end market growth across Manufacturing and DSA continues. We have updated our estimates to reflect our additional work on the profitability profiles of CRL’s microbial, biologics, and CDMO businesses below and our 2024 EPS is now $11.15. Given this update and the improving demand environment, we are also raising our price target to $300 (17x ’24 EBITDA, 27x P/E)."

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