Episode Details

Charles River Laboratories (CRL) Q2 2026 — Q2 2026 (quarter ended June 27, 2026): revenue $1,004.1M vs $1,032.1M, DOWN 2.7% reported but UP 0.1% organic - the first organic growth since Q3 2023, ending nine straight down quarters. Non-GAAP diluted EPS $3.02 vs a $2.77 bar (+9.0%), but DOWN 3.2% from $3.12. GAAP diluted EPS $(0.03) vs $1.06, on a $63.7M loss from the CDMO and Cell Solutions divestiture ($1.40/share). Non-GAAP operating margin 20.5% vs 22.1% (-160bp YoY) but up 420bp sequentially from 16.3%. Guidance RAISED: organic revenue 0.0% to +1.0% (was -1.5% to -0.5%), non-GAAP EPS $11.15-$11.45 (was $10.80-$11.30). The 8-K was accepted by the SEC at 7:15am ET (before the open), so Aug 5 is the reaction session: $234.12 to $260.72 (+11.36%), then $265.51 and $267.49 - up 14.25% over three sessions, to the highest close of the last twelve months. The release states that the EPS decrease was 'partially offset by investment gains associated with the Company's deferred compensation plan, which totaled a net benefit of $0.19 per share in the second quarter.' That is a market mark on an executive compensation trust, and Charles River did NOT strip it out of the non-GAAP number the Street compares to. Take it out and run the buyback test: non-GAAP net income $146.2M less $0.19 x 48.421M shares is $137.0M; divided by LAST year's 49.316M diluted count, operations earned $2.78 against a $2.77 bar. A one cent beat. The buyback alone was worth $0.05 ($146.2M / 49.316M = $2.97 vs the reported $3.02), and $2.78 against $3.12 a year ago is DOWN 10.9%. THE CALL: HOLD (4/5, THE BOOKINGS INFLECTION IS REAL AND THE TAPE HAS ALREADY PAID FOR IT TWICE) — base-case value ~$190.0 vs ~$267.49 today. KEY METRICS: - CALL: HOLD 4/5, fair value $190 vs the $267.49 Aug 7 close (-29.0%). Bull $235, bear $110, buy under $160. Street: Buy, 37 analysts, 27 buy / 10 hold / 0 sell, avg target $260.22 - already 2.7% BELOW the price. - Revenue $1,004.1M -2.7% (organic +0.1%); non-GAAP EPS $3.02 +9.0% vs the bar but -3.2% YoY; GAAP EPS $(0.03). Operating margin 20.5% vs 22.1%. - Strip the $0.19 deferred-comp mark and the $0.05 buyback and operations earned $2.78 against a $2.77 bar. What to watch: UP: DSA net book-to-bill 1.19x, the highest since Q3 2022 and the THIRD straight quarter above 1.0x, on $701M of net bookings (+12.6% sequentially) and a $1.97B backlog; biopharma funding back near $100B; the K.F. Cambodia primate supplier turns into cheaper inventory in Q4; ~$70M of incremental annual savings; Investor Day on September 24, 2026. DOWN: revenue -2.7%, non-GAAP operating income -9.9%, H1 free cash flow $133.8M vs $281.7M (-52.5%), primate PRICING flat with any improvement landing in 2027, corporate overhead up 18.7% while revenue fell, net debt $2.43B vs $1.92B, and the raised guide requires H2 EPS of $6.23 vs $4.82 (+29.3%) with roughly half the margin gain from divestiture arithmetic. The CFO: 'Do not take the Q4 run rate and assume that that's the run rate going forward.' Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.