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

Narrow-moat Charles River Laboratories continues to experience pressure from cautious client spending amid macroeconomic challenges. Revenue in the second quarter was $1.03 billion, a decrease of 3.2% from the prior-year period primarily due to lower revenue from small and midsize biotech companies. Management no longer expects that overall demand trends will improve during the second half of this year, and it has revised its 2024 guidance. These headwinds will have a particularly negative impact on the discovery and safety assessment business due to a softer demand environment for preclinical testing as many global biopharma clients have announced restructuring programs and are reassessing their budgets due to a variety of factors, including macroeconomic issues, key drugs facing competition, and pending patent expirations.