CRL

A month has gone by since the last earnings report for Charles River Laboratories (CRL). Shares have added about 10.5% in that time frame, outperforming the S&P 500. But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Charles River due for a pullback? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Charles River Laboratories International, Inc. before we dive into how investors and analysts have reacted as of late. Charles River reported second-quarter 2026 company-defined non-GAAP earnings of $3.02 per share, down 3.2% year over year. The reported earnings topped the Zacks Consensus Estimate by 11.0%. GAAP net loss was 3 cents per share compared to GAAP earnings of $1.06 per share in the year-ago period. Revenues of $1 billion declined 2.7% (up 0.1% organically) year over year but beat the Zacks Consensus Estimate by 3%. DSA revenues totaled $606.5 million, down 1.9% year over year on a reported basis. Organic revenues increased 0.2%, driven mainly by higher study volume for regulated safety assessment services. The segment's GAAP operating margin rose 60 basis points to 20.5%, aided by lower intangible-asset amortization and reduced third-party legal costs tied to a non-human primate supply matter. The non-GAAP margin fell 180 basis points to 25.6% because of higher study-related direct costs. RMS revenues totaled $209.5 million, down 1.8% from the year-ago quarter’s level. Organic revenues declined 1.4% primarily due to lower sales of small research models in North America and weaker research model services, partly offset by growth in China. The segment's GAAP operating margin improved 50 basis points to 17.3%, mainly because of lower amortization following the Cell Solutions divestiture. The non-GAAP margin contracted 80 basis points to 24.5% on lower volume and an unfavorable geographic revenue mix. Manufacturing revenues amounted to $188.1 million, down 6.3% year over year, mainly because of the CDMO divestiture. Organic revenues rose 1.3%, supported by higher revenues in the Microbial Solutions business. GAAP operating margin surged to 34.9% from 6% a year earlier. The non-GAAP margin expanded 500 basis points to 37.8%, with the CDMO business and the benefit from its divestiture driving the improvement. The gross profit in the reported quarter was $363.4 million, up 1.8% from the prior-year quarter’s level. The gross margin of 36.2% expanded approximately 159 basis points (bps) year over year. Selling, general and administrative expenses increased 19.5% year over year to $228.9 million. Operating profit totaled $119.9 million, up 19.7% from the prior-year quarter’s level. The operating margin expanded approximately 224 bps to 11.9%. Cash and cash equivalents amounted to $192 million as of June 27, 2026, compared with $191.8 million at the end of the first quarter. Cumulative net cash provided by operating activities at the end of the quarter was $220.8 million compared with $376.3 million a year ago. CRL repurchased 0.6 million shares for $100 million during the second quarter at an average price of $174 per share. Year-to-date repurchases totaled $300 million, leaving $700 million available under the company's authorization. Charles River now expects reported revenues to decline 3.5% to 2.5% in 2026, compared with its prior projection for a 5.5% to 4% decrease. The Zacks Consensus Estimate for 2026 revenues implies a decline of 3% year over year. The company raised its non-GAAP earnings guidance to $11.15-$11.45 per share from $10.80-$11.30. The Zacks Consensus Estimate for the metric is pegged at $11.28 per share. Since the earnings release, investors have witnessed a downward trend in estimates revision. Currently, Charles River has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a score of D on the value side, putting it in the bottom 40% for this investment strategy. Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in. Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Charles River has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months. Charles River is part of the Zacks Medical Services industry. Over the past month, HCA Healthcare (HCA), a stock from the same industry, has gained 0.1%. The company reported its results for the quarter ended June 2026 more than a month ago. HCA reported revenues of $20.23 billion in the last reported quarter, representing a year-over-year change of +8.7%. EPS of $7.59 for the same period compares with $6.84 a year ago. HCA is expected to post earnings of $6.80 per share for the current quarter, representing a year-over-year change of -2.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.8%. The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for HCA. Also, the stock has a VGM Score of B. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Charles River Laboratories’ second quarter results were shaped by recovering biopharmaceutical demand and the impact of portfolio streamlining. Management highlighted that the rebound was most evident in the Discovery and Safety Assessment (DSA) segment, where net book-to-bill reached a four-year high and organic revenue growth turned positive for the first time since 2023. CEO Birgit Girshick pointed to an uptick in proposal activity and improved funding for small and midsize biotech clients as critical factors that helped stabilize revenues, even as North American academic and government spending remained subdued. The divestiture of non-core businesses provided an immediate operating margin benefit, with the Manufacturing segment seeing notable improvement. Is now the time to buy CRL? Find out in our full research report (it’s free). Revenue: $1.00 billion vs analyst estimates of $979.9 million (2.7% year-on-year decline, 2.5% beat) Adjusted EPS: $3.02 vs analyst estimates of $2.74 (10.3% beat) Management raised its full-year Adjusted EPS guidance to $11.30 at the midpoint, a 2.3% increase Operating Margin: 11.9%, up from 9.7% in the same quarter last year Organic Revenue was flat year on year (beat) Market Capitalization: $13.46 billion While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention. Kallum Titchmarsh (Morgan Stanley) asked about AI’s role in preclinical pipelines; CEO Birgit Girshick said AI-driven drug discovery should eventually increase demand for validation and safety studies, but material impact will take time. Ann Hynes (Mizuho) questioned the risk from Chinese CROs; Girshick explained that while competition is rising, most regulated safety work remains in Western labs, and Charles River is prepared to differentiate through service and supply chain. David Windley (Jefferies) asked about NHP supply and margin cadence; Girshick and Coleman clarified that the main cost benefits from Cambodian NHPs would be recognized in Q4, not Q3, due to quarantine and study timelines. Charles Rhyee (TD Cowen) inquired if Q4 should be considered the new baseline for margins; Coleman advised against annualizing Q4 results, noting exceptional factors and ongoing portfolio transitions. Elizabeth Anderson (Evercore ISI) questioned service mix in bookings; Girshick said there is a shift to more pre-IND (early-stage) work, which supports later-stage growth and improves long-term pipeline visibility. In the coming quarters, our team will monitor (1) the pace at which DSA bookings convert to revenue, (2) realization of margin benefits from integrated NHP supply and Manufacturing segment improvements, and (3) progress on digital pathology and bioanalysis capacity expansions. We will also track whether the biopharma funding environment continues to bolster demand from smaller biotech clients, as well as signs of recovery in academic and government research spending. Charles River Laboratories currently trades at $281.81, up from $234.12 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members). ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively. Find out which 5 stocks it’s flagging this month — FREE. Get Our Top 5 Growth Stocks for Free HERE. Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.

Image source: The Motley Fool. Wednesday, Aug. 5, 2026 at 9:00 a.m. ET Vice President of Investor Relations - Todd Spencer Chief Executive Officer - Birgit Girshick Executive Vice President and Chief Financial Officer - Glenn Coleman Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Charles River Laboratories Second Quarter 2026 Earnings Conference Call. This call is being recorded. [Operator Instructions] I would now like to turn the conference over to our host, Todd Spencer, Vice President of Investor Relations. Please go ahead. Todd Spencer: Good morning, and welcome to Charles River Laboratories Second Quarter 2026 Earnings Conference Call and Webcast. This morning, I am pleased to be joined by Birgit Girshick, our Chief Executive Officer; and by Glenn Coleman, our Executive Vice President and Chief Financial Officer. They will comment on our results for the second quarter of 2026 as well as our financial guidance. Following the presentation, they will respond to questions. There is a slide presentation associated with today's remarks, which will be posted on the Investor Relations section of our website at ir.criver.com. A webcast replay of this call will be available beginning approximately 2 hours after the call today and can be accessed on our Investor Relations website. The replay will be available through next quarter's conference call. I'd like to remind you of our safe harbor. All remarks that we make about future expectations, plans and prospects for the company constitute forward-looking statements under the Private Securities Litigation Act of 1995. Actual results may differ materially from those indicated. During this call, we will primarily discuss non-GAAP financial measures, which we believe help investors gain a meaningful understanding of our core operating results and guidance. The non-GAAP financial measures are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. In accordance with Regulation G, you can find the comparable GAAP measures and the reconciliation on the Investor Relations section of our website. I will now turn the call over to Birgit Girshick. Birgit Girshick: Thank you, Todd, and good morning. Today, I would like to discuss the progress that we made during the second quarter, both financially and on our refreshed strategic framework pathway to purpose. I'm pleased to report that we delivered on our second quarter financial targets, exceeding our prior outlook for the quarter and that we are raising our financial guidance for the year. We continue to remain focused on execution on achieving our financial targets and driving increased shareholder value as well as executing on our pathway to purpose strategy which includes working to modernize our company and the industry, strengthening our world-class scientific portfolio and offering a customized client-centric approach to drive growth. Execution of our pathway to purpose strategic initiatives and our financial goals will be the key to our future success. Let me now provide you with the recent highlights that demonstrate our progress on our pathway to purpose initiatives as well as our second quarter performance. First, we were encouraged that the biopharmaceutical demand environment continued to strengthen in the second quarter, particularly in the DSA segment. The DSA net book-to-bill rose to nearly 1.2x in the second quarter, making this the third consecutive quarter that the DSA net book-to-bill has been above 1x and our highest level achieved in nearly 4 years. Our constructive view was also supported by a return to organic revenue growth of 0.1% for the total company, which marks the first time that revenue has improved organically since the third quarter of 2023. We firmly believe these trends position us well to drive higher organic growth during the second half of the year. As part of our efforts to further deepen client relationships, in June, we announced a unique collaboration with Eli Lilly's TuneLab drug discovery platform. In support of Lilly's goal to advance R&D modernization efforts, we will provide our nonclinical or wet lab testing expertise to help build and optimize Eli Lilly's AI and machine learning drug discovery model. We believe this type of collaboration demonstrates that the future state of drug discovery and development will require traditional in vivo and in vitro solutions even when integrated with AI or other in silico approaches to help enhance the speed and scientific data needed to support our clients' R&D programs. And Charles River is a scientific partner that is uniquely positioned to be able to integrate traditional in vivo, in vitro and new innovative capabilities into one comprehensive solution for the biopharmaceutical industry. We are also utilizing new technologies, including AI, to modernize and strengthen our own scientific portfolio, including an enhanced digital pathology solution that delivers AI-enabled end-to-end workflows designed to improve study turnaround times and increase pathologists' efficiency. With over 140 trained pathologists on staff, pathology always has been one of Charles River's greatest strength. And this enhanced digital solution will drive both internal operating efficiency and greater speed for our clients' programs. On goal for clients that utilize our fully integrated digital pathology solution will be to cut at least 1 week from standard pathology time lines. As I discussed in detail last quarter, we completed the divestitures of certain European discovery services sites in May 2026 as well as the CDMO and Cell Solutions businesses. The partial quarter benefit from the divestitures was one of the drivers of the 420 basis points of sequential operating margin improvement in the second quarter to 20.5% and helps us refine the portfolio to create a more streamlined offering focused on our core competencies in regulated testing solutions. We are also continuing to invest organically in our scientific capabilities to support our future growth and accommodate more of the testing requirements for our clients' therapeutic programs including in the area of lab sciences and specifically bioanalysis. Demand for lab science services has been growing nicely over the past 5 years, driven by large molecule, bioanalysis, biomarkers and additional testing requirements in both regulated and nonregulated programs, including in the clinical development phase. To support this growth, we recently embarked on an expansion to add bioanalytical laboratory capacity at Heriot Watt University's Research Park in Scotland. This expansion, which is 1 of 5 ongoing lab sciences expansions globally at Charles River will also offer an opportunity to partner with Harriet Watt University on the talent pipeline to further support our future growth in bioanalysis and in the region. My final highlight demonstrates how our broader strategy is working to support our client-centric approach. We recently announced a collaboration with Arovella Therapeutics to provide next-generation sequencing or NGS services to accelerate progress towards their alternative cancer treatment approaches using cell and gene therapy. This collaboration shows that by strengthening our scientific capabilities with an innovative in vitro NGS testing solution through our recent acquisition of PathoQuest, we are able to deepen client relationships and expand the possible opportunities for collaboration. In today's dynamic marketplace, there are abundant opportunities to further differentiate Charles River from the competition. We stand along with our strong financial profile, refreshed strategic vision and scientific expertise focused on our core regulated testing capabilities that span early-stage development through the clinic and beyond. Clients are expecting their scientific partners to help them drive greater innovation, speed and efficiency, and we are making great progress under our pathway to purpose strategic framework to become an even more modern client-centric organization that will operate more simply with more agility and enhanced digital connectivity. As the biopharma demand environment improves, this will enable us to become an even more essential partner to our clients, work with them across our differentiated portfolio and gain a greater share of their R&D spend. Let me provide a brief update on the end market trends. As I mentioned, we believe the biopharma demand is continuing to sustainably improve. Small and midsized biotech clients are leading the trend as a result of the invigorated funding environment demonstrated by a trailing 12-month funding of nearly $100 billion which is just shy of peak levels achieved during the pandemic. While we continue to monitor for changes in the funding environment, whether it be from interest rates and inflation pressures or other macroeconomic factors, funding activity has been resilient and broad-based to date, including a notable increase in IPO activity as well as solid VC and follow-on funding. Overall, revenue from small and midsized biotechs was essentially flat organically in the second quarter, which is an improvement from declines in recent quarters. As a reminder, there is a natural lag of several quarters between studies are booked into backlog and work their way through to revenue. So we're just beginning to see the benefit from improved DSA booking activity from late last year. Therefore, the strengthening booking activity that we have experienced through the middle of this year gives us greater confidence that we will generate incremental organic revenue growth starting in the third quarter on both a consolidated basis and in the DSA segment. Global biopharmaceutical clients were also a significant contributor to the improving DSA demand KPIs in the second quarter. As I mentioned last quarter, most of our global biopharma clients have progressed through restructuring and pipeline reprioritization activities over the last several years. Demand trends have been improving gradually over the last 18 months with a continued evidence this year. Revenue from global biopharmaceutical clients continued to increase organically in the second quarter. I will now provide some highlights from our financial performance before Glenn provides additional detail. First, we are pleased that our second quarter results exceeded our prior outlook for revenue and non-GAAP earnings per share. Second quarter revenue increased 0.1% on an organic basis compared to our prior outlook of a low single-digit decline. In addition to the solid top line performance, the operating margin increased 420 basis points sequentially to 20.5% due to 2 primary factors: First, less pressure from several discrete margin headwinds that impacted the first quarter as we had anticipated. And second, a partial quarter benefit from the divestitures that enabled the Manufacturing segment's operating margin to jump to 37.8% in the second quarter. For the remainder of the year, we continue to have a clear line of sight into the drivers behind at least 500 basis points of margin improvement expected in the second half of the year with the largest drivers being the actions that we have already taken to strengthen and refine our portfolio. Non-GAAP earnings per share of $3.02 increased 47% sequentially, which was well above our prior outlook of at least 30% sequential growth. Glenn will provide more details on the operating margin and earnings drivers in a moment as well as our increased financial guidance. RMS revenue declined 1.4% organically. This represents an improvement from the first quarter level due principally to the timing of NHP shipments, which were more normalized in the second quarter and did not have a meaningful impact on the year-over-year growth rate. The primary drivers of the year-over-year revenue decline were lower revenue for small models in North America as well as for research model services, including Genetically Engineered Models & Services or GEMS. These declines were largely offset by continued robust demand for research models in China from mid-tier biotech and CRO clients. For the year, we continue to expect a low to mid-single-digit organic revenue decline in the RMS segment, with much of this decline driven by lower volumes for research models in North America. This is largely because spending from academic and government clients has been constrained by flat NIH budgets and slower grant processing. DSA revenue returned to growth, increasing 0.2% organically in the second quarter. As noted, it takes several quarters for projects booked to work through the backlog and into the revenue stream. So we are just beginning to see the benefits of the improved biopharmaceutical demand trends from the end of last year. The second quarter improvement was broadly driven across multiple study types and modalities, including a more discernible uptick in IND-enabling studies as clients shift their research focus earlier to replenish their pipelines and continued strength for NHP-related studies, reflecting our clients' focus on complex biologics. Regulatory required safety assessment studies utilizing NHPs have become a competitive advantage for Charles River because of our more reliable supply of these critical research models after strengthening our portfolio through the acquisitions of suppliers in Cambodia and Mauritius in recent years. We expect the DSA growth rate to accelerate in the second half of the year, supported by encouraging trends in the DSA demand environment to date. Net bookings increased significantly year-over-year and by 12.6% sequentially to $701 million in the second quarter, resulting in an increase in the DSA backlog to $1.97 billion and a net book-to-bill of 1.19x. The second quarter improvement was broad-based across both global biopharmaceutical and small and midsized biotechnology client segments. As noted, these were the highest levels for the net book-to-bill and net bookings in nearly 4 years since the third quarter of 2022 and the third consecutive quarter that the net book-to-bill was above 1x. These trends, combined with another strong increase in proposal activity during the second quarter, leave us cautiously optimistic that the positive momentum will continue. Underlying DSA market demand is improving as supported by the recent strength in biotech funding and the improvement in our KPIs. In this environment, we continue to differentiate ourselves in the marketplace through our financial stability, scientific expertise, global scale and digitized client experience, which accelerates the speed with which we are able to work with our clients and enables us to take share. As a result of these collective trends, we have raised our DSA outlook to low single-digit organic revenue growth in 2026. That said, we continue to expect the recovery will be marked by gradual progress. Manufacturing revenue increased 1.3% organically. Revenue for Microbial Solutions continued to increase at a high single-digit rate in the second quarter, partially offset by more modest growth in the Biologics Testing business. The manufacturing organic growth rate is expected to improve to mid- to high single-digit rates in the second half of the year when the biologic testing growth rate rebounds after we anniversary a client-specific challenge that has been a headwind since the middle of last year. In addition, CDMO was also a headwind to organic growth for the partial quarter because it wasn't divested until May. As I close today, I want to share a reflection for my first few months as CEO. I've had the privilege of visiting more than 40 Charles River sites across 7 countries, meeting with employees in town hall and individual settings and hearing firsthand about their work, their challenges and their ideas. What struck me most was the consistent passion, commitment and sense of purpose I saw everywhere I went. Those conversations left me even more confident in the future of Charles River and our ability to deliver long-term success for our clients and shareholders and the patients we ultimately serve. They also reinforced for me how critical our pathway to purpose strategy is in guiding our decisions, strengthening our culture and positioning the company for sustainable growth. I remain incredibly optimistic about what we can achieve together and look forward to building on the strong foundation we have created. Now I will turn the call over to Glenn to provide more details on our second quarter financial performance as well as our 2026 guidance. Glenn Coleman: Thank you, Birgit, and good morning. As a reminder, my comments on financial performance will largely be related to non-GAAP results, which exclude amortization and other acquisition and divestiture-related adjustments, costs related primarily to restructuring and efficiency initiatives and certain other items. Many of my comments will also refer to organic revenue growth, which excludes the impact of acquisitions, divestitures and foreign currency translation. We are pleased with our financial performance for the second quarter with both revenue and non-GAAP earnings per share exceeding our prior outlook. On an organic basis, revenue was essentially flat year-over-year compared to our prior forecast of a low single-digit decline, driven by better-than-expected performance in our DSA and Manufacturing segments. The non-GAAP operating margin of 20.5% was in line with our forecast, but improved by 420 basis points on a sequential basis over the first quarter. Non-GAAP earnings per share of $3.02 also exceeded our expectations with over half of the outperformance driven by better-than-expected top line results and the remainder by a favorable contribution from nonoperating items, which I'll discuss in more detail shortly. In the second quarter, we also repurchased $100 million in shares at approximately $174 per share under the $1 billion stock repurchase authorization approved last October. This brings our total year-to-date share repurchases to $300 million and reflects the continuation of our thoughtful and diligent approach to capital deployment to enhance shareholder value as we balance organic investments in the business, pursue strategic acquisitions and repay debt. Our updated guidance assumes an average diluted share count of approximately 48.5 million shares for the full year 2026. Moving to details on our segment performance. DSA revenue was $607 million in the second quarter, a decrease of 1.9% on a reported basis compared to the second quarter of 2025 due primarily to the impact of the divestiture of certain European discovery sites. On an organic basis, revenue increased 0.2% and was also the first time we reported organic growth in DSA since the third quarter of 2023. Year-over-year, operating margin decreased by 180 basis points to 25.6%, however, increased by 460 basis points on a sequential basis from the first quarter. The year-over-year decline was primarily due to higher study-related direct costs. However, we expect this year-over-year margin headwind to turn favorable in the coming quarters as we benefit from lower NHP sourcing costs as a result of the acquisition of our Cambodian NHP supplier. The lower sourcing costs for Cambodian NHPs will begin to benefit the DSA operating margin in the third quarter, but will have a more significant margin contribution in the fourth quarter as we increase our use of these models on studies. As a result, we expect the operating margin in DSA to be the highest in the fourth quarter. Shifting to the RMS segment. Revenue was $209 million in the quarter, representing an organic decline of 1.4% year-over-year. Small model revenue experienced lower volume for research models in North America and for research model services, partially offset by continued strong demand in China. Operating margin declined by 80 basis points to 24.5% in the second quarter due largely to the impact of lower sales volume and an unfavorable geographic revenue mix. Wrapping up the segment performance, the Manufacturing segment reported second quarter revenue of $188 million, an increase of 1.3% on an organic basis. The CDMO business reduced the segment organic revenue growth rate by nearly 400 basis points in the quarter, with the segment growing at a mid-single-digit organic growth rate, excluding CDMO. The strong performance in our Manufacturing segment was largely driven by high single-digit organic growth in our Microbial Solutions business as we saw increases in demand across our 3 major geographic regions for endotoxin testing reagents, including our PTS rapid testing cartridges as well as adding new clients to our strong broad-based quality control testing platform. Operating margin improved by 500 basis points year-over-year to 37.8%, driven primarily by the benefit of the CDMO divestiture. We expect the Manufacturing segment to remain a meaningful contributor to margin expansion during the second half of the year with the operating margin approaching 40% with the full benefit being recognized from the CDMO divestiture. Moving on to other financial metrics. Unallocated corporate costs were higher than expected in the second quarter, totaling $72 million or 7.2% of revenue compared to 5.9% in the prior year period. The increase was primarily driven by increased costs related to our deferred compensation plan of $6 million or $0.10 per share due to the market performance of the plan assets during the quarter. To fund the deferred compensation plan, we separately invest in certain funds, which experienced gains of $19 million or $0.29 per share in the second quarter. These gains are included in other income. The net benefit associated with our deferred compensation plan was $0.19 per share in the second quarter, which we do not expect to recur. Based upon our second quarter results and updated forecast, which also encompasses higher performance-based compensation, we now expect unallocated corporate costs of approximately 6.0% of revenue for the full year compared to our prior outlook of approximately 5.5%. Net interest expense was $28 million in the second quarter, a decline of $1.2 million year-over-year. For the full year, our net interest expense outlook remains unchanged at $103 million to $108 million on a non-GAAP basis. At the end of the second quarter, our net leverage improved slightly to 2.5x from the first quarter. The non-GAAP tax rate in the second quarter was 23.8%, an increase of 110 basis points year-over-year due primarily to the impact of discrete items. For the full year, we now anticipate our non-GAAP tax rate will be in the range of 23% to 24%, an increase of approximately 100 basis points from our prior outlook, primarily as a result of the unfavorable second quarter rate and a higher tax rate due to proposed tax legislation changes in a foreign tax jurisdiction. The higher tax rate outlook for the year is expected to be a $0.20 headwind to earnings per share with about half of the impact in the third quarter. Free cash flow was $149 million in the second quarter, a decrease of $21 million compared to the prior year period. This decline was primarily driven by the timing of working capital. CapEx declined to $31 million or approximately 3.1% of revenue in the second quarter from $35 million last year. For the full year, we're raising our free cash flow projections to be in the range of $400 million to $420 million compared to our prior outlook of $375 million to $400 million, largely driven by higher earnings. Turning to full year 2026 P&L guidance. We are increasing both the reported and organic revenue outlook due primarily to the DSA and manufacturing outperformance in the second quarter and our expectations for further improvements during the remainder of the year. We now expect reported revenue to decline in the range of 2.5% to 3.5%, driven by the impact of completed divestitures. We're also raising our organic revenue growth in the range of flat to a 1% increase, which represents a 150 basis point improvement to our prior guidance. By segment, on an organic basis, we're increasing our DSA revenue outlook to low single-digit growth for the year, and we're also adjusting our manufacturing revenue outlook higher to a low to mid-single-digit growth rate. Our RMS outlook remains unchanged. Moving to profitability. We continue to expect operating margin expansion of approximately 120 to 150 basis points in 2026, with the Manufacturing and DSA segments driving the year-over-year increase. We have a clear line of sight into the second half improvement of at least 500 basis points compared to the first half of the year. As shown on Slide 14, approximately 50% of the second half improvement will be attributable to the portfolio actions already completed, including the full benefit of the divestitures as well as the lower NHP sourcing costs from the K.F. acquisition, which will largely benefit the fourth quarter. Lower corporate costs are estimated to drive approximately 150 basis points of the improvement with the balance derived from other operational contributors, including efficiency savings. Lower corporate costs in the second half will reflect favorable stock compensation expense related to the CEO transition and fringe costs, which are typically lower in the second half of the year. We are also increasing our non-GAAP earnings per share guidance to a range of $11.15 to $11.45, which represents 8% to 11% year-over-year growth and an increase of $0.25 at the midpoint of our prior outlook. The increase reflects the expected operational outperformance for the year, driven primarily by improving trends in the DSA segment and a better-than-expected performance in the Manufacturing segment. Separately, we expect the $0.19 net benefit associated with the deferred compensation plan will not have a meaningful impact on non-GAAP earnings per share in 2026 as it is expected to be entirely offset by the higher tax rate outlook for the year, which is an approximate $0.20 headwind. For the third quarter, revenue is expected to decline approximately 4% to 6% on a reported basis, primarily driven by the impact of the completed divestitures. We expect organic revenue growth of approximately 1% to 3% year-over-year, reflecting improving demand trends in the DSA segment and an expected rebound in Biologics Testing growth rate, which will drive higher manufacturing revenue growth. In addition, operating margin is projected to improve approximately 200 basis points sequentially versus the second quarter due largely to lower corporate costs and a full quarter benefit from the divestitures. For the third quarter, we expect non-GAAP earnings per share in the range of $2.90 to $3.00, representing an approximate 20% year-over-year increase. As previously mentioned, the higher tax rate outlook creates a $0.10 headwind to third quarter earnings per share, which has been included in the guidance. In conclusion, I'm encouraged by the recent improvement in the underlying business trends and our first half performance, including the execution of our strategic priorities, which demonstrate our commitment to our pathway to purpose strategy and enhancing long-term shareholder value. Over the past several months, I've had the opportunity to meet with employees across our global organization as well as shareholders and other stakeholders. These interactions have further strengthened my confidence in our capabilities, our people and the momentum we are building across the organization. I look forward to continuing to work with the team to execute our strategy and to sharing more information about our long-term priorities and financial targets at our upcoming Investor Day on September 24. Thank you. Todd Spencer: That concludes our comments. We will now take your questions. Operator: [Operator Instructions] We'll go first to Kallum Titchmarsh with Morgan Stanley. Kallum Titchmarsh: Wanted to start actually on AI. We've been fielding quite a lot of questions on the space in relation to kind of preclinical work, and you called out some of the partnerships here. So maybe just talk us through your expectations for the preclinical pipeline evolving from that smarter drug discovery and whether that seems like a plausible thesis to you based on the discussions you've had with customers. I think we're just trying to work out when that impact starts creeping into numbers via more like IND-enabling studies, but would love your views there. Birgit Girshick: Thanks, Kallum, and absolutely happy to. So obviously, AI is a hot topic everywhere. And we talk to a lot of clients about it, what their expectations is, where they're investing into. And so from our perspective, a lot of the articles or the pieces that were published support our thesis on it. So once AI provides more productivity into the molecule design, target identification, makes more molecules may be available to move into the validation stage and the regulated safety assessment stage and makes the molecule design more efficient, we expect more programs to work itself through the safety assessment stage, the validation stage, the area that is core to us. And we expect that it will actually be a tailwind for us and drive demand. Timing is a little bit more difficult to estimate. Obviously, companies have worked on AI for a long time. But on the other hand, technology is accelerating -- so really, we'll have to see when those efficiencies are being delivered, when the cost savings for our clientele can materialize. What we are already seeing actually is that a lot of companies that are more AI native or drug discovery companies that use AI platforms, they're generally running more programs than a typical biotech that generally comes in with 1 or 2 programs. The numbers are still very small, but that will accelerate materially over the next, I would say, year or 2. So we should see some impact -- positive impact over the next few years, but it will take some time to really ramp that up. And when it's going to be material is a little bit harder to estimate. But I think you will see some ramp-up over the next couple of years, more programs, more validation, more data needed to validate the platforms. So all of that should be a tailwind for the work we do. In addition to that, we, as a company, are investing in AI tools, enabling platforms that give us more insights, also allow us to put efficiencies in place. Those are all really focused on the work we do. So that validation, safety assessment stage that is core to us. And that will allow us to differentiate ourselves to help our clients to move faster, time is money as usual and then also provide us for our work with some efficiencies. So we are really excited about AI. I think it will be an enabler, a differentiator. But obviously, technology has to advance and continue to advance and then prove itself. But great question, Kallum. Kallum Titchmarsh: Yes. That's great color. And then just secondly, when we think about the portfolio refinement we've seen over the past year or so, clearly, benefits starting to come through from that. Is it fair to assume you're now comfortable with the current shape of the business? Maybe just talk through appetite for maybe more deals or divestitures and then more broadly to capital allocation. Birgit Girshick: Yes. I'm going to start on that, and then I'll let Glenn chime in here a little bit more on the capital allocation. So from a point of divestitures, we absolutely are seeing the benefits from that, both financially in terms of our OI improvements, but also from an ability to focus on the core portfolio. So -- and that was a big driver for us to really getting back to core to what we do best, where we have the biggest relevance to our clients, where we provide the highest value. And that will allow us as a leadership team, but also our sales organization and our operational organization to really focus on being the best partner for our clients possible. We continue to look at our portfolio like we always have done. So if you think back, Charles River has, over the years, divested other businesses. We have had a program of site consolidations, but we also have a healthy appetite for M&A. So we will continue to look at all of that. Nothing imminent on the divestitures. We're still continuing to execute on some site closures that we had announced last year. And certainly, from an M&A perspective, we have a good road map. We have a clear target area we are interested in. But as you know, it's always difficult to estimate when targets are available, are they coming in for the right price. So more to be seen. But definitely, we will keep it broad-based and continue to look at refining our portfolio. Glenn Coleman: Yes. And the only thing I'd add is, obviously, our balance sheet is in very good shape. We can support our acquisition strategy going forward. If you look at where our leverage is, we ended around 2.5x even after the most recent $100 million share repurchase that we did in the second quarter. We generated strong cash flows in the quarter. We actually raised our free cash flow guidance. We have plenty of capacity under our existing revolver at very attractive rates. And so I think we're very well positioned from a balance sheet perspective to support our acquisition strategy. You can never predict when they're going to happen, but we'd love to be able to add a couple of additional companies to our portfolio. Operator: Our next question comes from Ann Hynes with Mizuho. Ann Hynes: Great. On the call, you talked about how the demand in biotech was accelerating. Can you talk about your other customer segments, especially how large biopharma is doing? Birgit Girshick: Yes, happy to, Ann. So it's actually great to see that both our major client segments are strengthening, and we're seeing more demand from both of them and our KPI -- forward-looking demand KPIs are strengthening in both segments. Looking at the global biopharma specifically -- most or all of our global biopharma clients, and we work with all of them, have moved through their portfolio prioritization, have moved through their restructurings over the last few years. And over the last 18 months, we've really seen them coming back to work, booking more work, more discussions, more proposals and fewer cancellations. So it's going all in the right direction. And we have a lot of discussions with those clients. So we understand that their focus right now is on more molecules into the clinic, more molecules approved and being approved for commercial distribution to the patients. So it's all about more programs, more speed, more agility, and I think we are the differentiated partner for them to help them execute on that. Ann Hynes: Great. And my follow-up question is just about China. I get asked a lot about this. And I think there's like 2 competitive debates investors are focused on. One is just like the increasing capability of Chinese CROs and the other is whether a large pharma is bringing more preclinical work in-house in China. Maybe can you talk about these as real risks and how do you think about it long term? Birgit Girshick: Yes. And so we certainly watch China very, very, very closely, right? So an emerging or maybe a little bit past emerging innovative market, really interesting from a perspective of serving this market directly. As you know, we have a strong research models and services business in China. So we are a well-established, highly respected participant in that industry. And it certainly would serve well to expand on that business. And so we're looking at options at any given time at how we can accomplish that. From the other hand is the -- as you said, the competition in China, adding more capabilities. This is a trend that has started probably a decade, maybe even longer, really focused initially on the very early-stage capabilities, chemistry and biology. And that market definitely has structurally changed and moved into a lower -- generally moved into a lower-cost countries, including China, but also a bit in India. We are now looking to see what their ability of bringing on more regulated work is -- this is still the minority generally focused on companies that are doing their Phase I work in China, but we are watching that very closely and are very prepared to differentiate ourselves here in the West with our services, with our speed, with our supply chain and being the best partner we can be here for our clients. Yes, some of our global biopharma clients are moving maybe more into China with some R&D centers. They do establish with that some capabilities. There, again, from what I can see at the very early stage, not so much in the regulated Safety Assessment market. I think all our global biopharma clients have established the understanding that it's really hard to be in this area, particularly because of that regulated nature, keeping up the scale and a capability that would make sense for them. So we believe that their investments are in the true R of the R&D stage and that we continue to support them in more of the development stage. Operator: We'll move next to David Windley with Jefferies. David Windley: I'll forewarn you. This is a multiparter, period. I'm interested in demand environment. You talked in the prepared remarks about pretty balanced demand in DSA across study types. I'm hearing that large molecule or large animal NHP specifically studies are in quite high demand to the point that maybe some of your competitors are running short on capacity in the near term. So my questions are what your view is of kind of the demand landscape by study type? And then help us to understand maybe a little bit more clearly the availability of NHPs that you have from previous Noveprim and more recently, K.F. -- and kind of how much excess capacity or animal supply can you dip into there? Or do you have to wait for contracts to run out? Are they already claimed, et cetera, to be able to service what I think is NHP growing demand? Birgit Girshick: Certainly, David. Great questions, and I wouldn't expect anything less than a multi question from you. David Windley: I got another one for you. Birgit Girshick: So looking at demand, yes, we talked about broad-based. We were referring quite a bit to pre-IND versus post-IND studies, which really has balanced out quite a bit, which is great because we need both. We need the pre-IND because that will eventually translate into post-IND. We also referred to healthy demand in the more complex areas and in NHP studies specifically. And we believe that this is both very positive. It shows that clients are reinvesting in early-stage pre-IND work, but it also shows that clients are very focused on more complex modalities, which provides us with a nice uptick in revenue opportunity, both not only in the in vivo study, but also from a bioanalysis study because there's more revenue associated with a more complex modality than in small molecules. Specific to your question on nonhuman primate supply, you obviously know and you referred to it that we have acquired a Mauritius farm a few years ago and then the Cambodian farm last year -- by having ownership of it, there's a couple of things that we can do that we would otherwise not be able to do. Number one is control the quality, the logistics, the timing of shipments, and that is helping us a lot. But then also to control the capacity itself. So we can obviously breed more that will take a little bit of time, but we can also either accelerate some shipments or hold back some shipments. So it is really about managing the capacity to the peak levels. We still have third-party contracts that we were executing on. They are ramping down, and we will work through that with our customer over the next few years and move more and more of those animals into client studies in our DSA segment. So overall, we are quite happy that we are integrated into the supply chain, as you can imagine. We are in a very healthy state of having animals available. We'll have to see where demand goes. We are really differentiated now because of that nonhuman primate supply. And we see that as a possibility, obviously, to gain market share. But overall, I think we're in the best state possible at this stage, and we will leverage that. David Windley: Great. If I could just squeeze in a follow-up quickly on the same topic. I think as I'm looking at both consensus and our numbers relative to the guidance that you're giving for third quarter, I think the primary difference is kind of a cadence of perhaps your access or the benefit of the NHP cost drop to your margin. It sounds like it's landing mostly in the fourth quarter rather than the third quarter. Maybe I don't know if this is a Glenn question, but maybe you could talk a little bit about the cadence. Are there animals that are going to be on quarantine in the third quarter that are depressing that impact a little bit, just kind of the third quarter, fourth quarter cadence as to how that K.F. benefit materializes. Glenn Coleman: Yes. No. So, relative to the margins and what we see right now, we're expecting a minimal impact in Q3. There will be some impact, but very small. The large impact will be in Q4. And so we do expect to see a very meaningful move in margins in DSA in the fourth quarter as a result of the NHPs and then being placed on studies and those direct costs going lower in Q4. And that's where we're going to see the biggest impact. Birgit Girshick: Yes. And David, you got it absolutely right. So, just thinking through, you understand the timing of importation, quarantine, getting them on study and then generating revenue. It just takes some time to import them, quarantine them, acclimate them and then get them on study and generate revenue. It's just a matter of timing. Operator: Our next question will come from Charles Rhyee with TD Cowen. Charles Rhyee: Just wanted to follow up maybe a little bit more on that -- on David's cadence question here. So if I think, Glenn, you said that 4Q DSA revenue will be the highest. And I guess the question then is, is that the right kind of run rate we should think about as we look forward into '27? Because clearly, when we've seen the strong demand uptick and we're seeing this continuous improvement in the book-to-bill, is maybe then the 4Q the right jump-off point? Or is there anything that maybe because it's maybe delayed from 3Q to 4Q that might be sort of a onetime-ish kind of benefit partially so that we shouldn't use that as the jump-off point? Glenn Coleman: Yes. Charles, let me give you a little color. So, your comment on revenues, my comment was really around margin being the highest for DSA in the fourth quarter, to be clear. and that's driven by these lower costs for the NHPs. As we look at the sequencing of margins, I mentioned in my prepared remarks about a 200 basis point sequential improvement from Q2 to Q3. That's largely driven by lower corporate costs and some benefit from divestitures. And then we'd expect probably about another 300 basis point improvement to Q4 to get to our full year guidance numbers, and most of that will come from the acquisition of K.F. Cambodia and the benefit we'll see in the DSA segment. So just so you know how we're sequencing out the Q3 and Q4 margins and obviously, the comments that I made earlier around the margins, not the revenue. Charles Rhyee: Okay. That's helpful. Sorry, I must have misheard. And then maybe just a quick follow-up on the tax rate change. You said part of it is due to a proposed tax legislation change. Do we know when that will actually be finalized? Or -- so is this an estimation of a posed change? And is there a chance that maybe it doesn't go through? Glenn Coleman: Thanks for the question. So, this is associated with Mauritius, and we are expecting to hear back literally any day now on what the changes are going to be. We've obviously been in close contact with the local authorities and understanding what this could be. And so we've modeled in our guidance the impact we are expecting. If for some reason, the impact is less, it would obviously be upside to our guidance right now. And just to put a finer point on it, when we raised our EPS guidance for the year by $0.25 at the midpoint, that's all operational. We have about a $0.19 gain overall that we expect to flow through the year, but we're anticipating a $0.20 tax headwind to offset that. So if for some reason, this tax legislation change does not happen, there would be upside to our EPS numbers. But right now, from what we know, we're pretty comfortable that it's going to happen, and we've factored it into our guidance. Operator: Our next question will come from Michael Ryskin with Bank of America. Michael Ryskin: Congrats on a great quarter. Birgit, maybe kind of going back to some of your prepared remarks on DSA strength, the book-to-bill commentary. You talked about demand trends, both in biotech and pharma. I would love to hear you talk -- comment on what you view as your capacity to support this. As you talked about, there's a lag between when some of these things convert into -- when funding converts into bookings, bookings convert into revenue. You've kind of tweaked capacity in DSA in prior years. Just talk about where you feel like you are now in terms of ability to absorb as that funding starts to flow through or if there's incremental investments you need to make. So like where are you looking out 12, 18, 24 months on that front? Birgit Girshick: Yes. Thanks for the question, Mike. So, because of some volume declines over the last few years, we have sufficient capacity for a while. Obviously, it depends on the growth rate and the volume growth rate as such. But at this stage, we don't see any issues neither from an in vivo perspective, so animal rooms, equipment and then we will have to make some adjustments in people, but that isn't always, always. So that is just part of doing business. From a lab perspective, we actually have expansions in progress. They are geared towards the future demand. And currently, we are fine, but we will need to execute on those expansions over the next couple of years. to be able to grow with the market or above. So overall, quite comfortable with what we have on capacity. Utilization will improve a little bit, which is a good thing. And -- but we don't see a bottleneck there. Michael Ryskin: Okay. And maybe a quick follow-up on pricing, both on NHPs and just more broadly, what you see in 2Q, what are your expectations for the second half? How is that kind of playing out with the uptick in demand? Birgit Girshick: Yes. Happy to address that, too. So, obviously, what we're seeing in Q2 right now is mostly booked a few quarters ago. And so, that -- what's flowing through right now is proposals that were basically done last year. But overall, what I would say is pricing has not materially improved yet. So, pricing is still stable. It is at the levels that we have seen for the last few years. Not more discounting, not less discounting. We are aggressive going after work, which shows in our capture rates. I'm actually quite happy seeing a little bit of an uptick in our capture rates, which indicates that our approaches -- our go-to-market approach is working. Our pricing strategies are working and that our differentiation strategy is working. And -- but we are looking kind of forward to the time where pricing becomes a little bit more available. We do think that will happen with capacity filling up a bit more over the next few quarters. But then again, it will take some time to work through that in our backlog. So just as a reminder, if we get a proposal today, it generally takes a quarter to go into bookings, another quarter or 2 to go into revenue generation. So any pricing uptick we might see in the upcoming quarters would flow through then in 2027, not before. So -- but I think pricing will improve as capacity improves. Operator: We'll take our next question from Justin Bowers with Deutsche Bank. Justin Bowers: Just going back to an earlier question on China. I was going to take it in a different direction. But on the clinical side, we're starting to see some of the in-licensing flow back in the U.S. And given the demand profile over there and what we think is some upward pressure on price over there, are you starting to see an uptick in work from biotechs that might have otherwise gone over there, stay here or that's coming back here? Can you talk about the opportunity set there? And then on pricing, are you starting to see that approach parity around the DSA side? Birgit Girshick: Yes. So on the -- first -- your first question first. So on the biotechs that did work in China, most of those -- that work is in the early stage in the chemistry biology. We don't really do that work anymore. It was actually part of the business that we divested, and we divested that because it didn't quite have the synergies nor the benefits to our portfolio that we were looking for. So for us, the regulated work that we are really focusing on our core business where most of our work is, has had very little influx into China so far. So not seeing this coming back doesn't mean the early stage isn't coming back. So basically, I can't really answer that question if the early-stage work is coming back because we're not seeing that in our proposals. It's not work we're doing. However, from discussions with clients, there is a level of uncertainty, but a bit more of a wait-and-see approach. And with the early stage work with the chemistry work because that goes relatively quickly, I think people will continue to work there until they can't anymore. So I don't think there is a huge need to build capacity here for them or move their work quickly. So -- but certainly, discussions are very frequent about what's the future there? Should we bring work over there? Should we bring it back? But I don't think that particular biotech clients really have acted on that in a major fashion yet. From a pricing perspective, so what we are hearing is from some of our clients is that the companies that are doing work for the West. So there's a very specific group of CROs -- their pricing is not too far off anymore to the Western pricing. They're still lower. They will continue to be lower, and they need to be lower to actually have an attractiveness to work being done in the West because there's still complexity with language and time zones and other reasons. But it is moderating a little bit. Now pricing for Chinese biotech and pharma is still considerably lower. So I don't know if that answered your question, Justin. Justin Bowers: It does, Birgit. That's helpful. Operator: Our next question comes from Casey Woodring with JPMorgan. Casey Woodring: I just want to go back to the competitive comments you made about NHP-related safety assessment studies becoming a competitive advantage for you because you have security of supply. Can you maybe just elaborate on that a little bit? You've always sort of been the leader in this space, right? I think historically, you've owned at least 1/3 of the Safety Assessment market. So just curious how much your win rate has maybe increased as a result of more of this in-sourcing? And then how much higher you think your share could go here in the near term? Birgit Girshick: Yes, I'm happy to. And Casey, so share is really hard to estimate. So I want to be very careful with that because there's really no public figures and many of our competitors are private companies, and we don't necessarily have the insight. So what we are looking at internally to see if our pricing strategies and our differentiation strategies are working is capture rate. And we had a nice uptick in our capture rate over the last few months. I wouldn't call it yet a trend because I want to see this trend continue for not just a quarter or 2, but for the remainder of this year into next year, but still good to see. And I think it does show that we are focusing on the right things. In terms of differentiation and competitiveness from nonhuman primates, obviously, that's been always a risk area for the industry. Do we have enough nonhuman primates? Do we have them at the time when we need them by being in control of that supply chain in control of the timing, when we bring them in, quarantine them, when we can put them on studies, -- that really gives our clients a lot of assurance that they can run their studies when they need them and that they don't have a time delay. So -- and I think that is a big benefit that we're bringing to the marketplace. And I think it's very acknowledged by our clients and just is deepening our client relationships and our preferred partnerships. Casey Woodring: Got it. That's helpful. And then maybe just one quickly on RMS. You mentioned academic and government is still weak. We've heard sort of mixed signals from some of the tools vendors on that end market. So maybe just talk about what you're seeing there. And then I don't think that you mentioned how CRADL performed in the quarter. So maybe just walk through that as well. Birgit Girshick: Yes, certainly. So let me start with academic and government. So this is a segment for us that primarily is being serviced by our research models and services business. It's about 15 -- it's actually about 10% of the total company, so a smaller segment of ours. What we're seeing currently is stable but not growing demand. And historically, this has been a client segment that has been a growth segment for our research models and services business. And what we are currently seeing is a little bit, I would say, uncertainty still, right? So NIH budget has been approved. Grants are coming out, but they are now multiyear. Some of the grant holders don't quite know how to work with this yet. I think this will open up more in the future. But currently, it's holding our research models business back a little bit compared to historical. And that's why we are not quite seeing the demand in -- specifically in North America that we would like to see. Looking at our CRADL business, CRADL is stable from a revenue perspective as well. But again, here, too, we're not seeing quite the growth that we historically have seen in our CRADL business. CRADL is specifically focused on new companies, new biotech companies that have funding, but do not want to spend or have enough funding to create their own vivariums. So we're providing them with a space to do their research early on, grow with them and then many of them leave and have their own vivariums but -- or they continue to stay with us for a few years. And this business is still a bit hindered. If you think about the company formation is growing, but only by 2% and far off from the COVID levels. So we just need to see a little bit more strengthening of that new company formation, new biotechs being established before we will see this CRADL business to return to former growth rates. Operator: Our next question comes from Elizabeth Anderson with Evercore ISI. Elizabeth Anderson: As we think about the bookings, which obviously was a really nice step-up to see in the quarter, can you talk a little bit more about kind of the mix of services within those bookings? Are they sort of similar to what your current revenue mix is? Are you seeing like incremental demand in certain places within DSA versus previously? Any kind of additional qualitative color there would be very helpful. Birgit Girshick: Yes, Elizabeth, happy to. So what we're seeing is a little bit of a shift from more post-IND work to more pre-IND work. Now we see this over time happening here and there in any time. But over the last few years, just because of funding was better available in later stage that post-IND had a bit more of a heavier component of our work. And over the last quarter, we saw that pivoting back a little bit to pre-IND work, which is great to see. We need both for the utmost profitability and capacity utilization at our company. But it is important that pre-IND work is being performed because that will just lead into later-stage work, more complex work, more specialty work. So that's actually a good sign that we are taking that the market, the funding, our clients' demand is strengthening. Elizabeth Anderson: Got it. And maybe as a follow-up, just to understand, how do you guys feel about any kind of incremental investment levels? I understand what you've been saying about some of the technology and AI investments really helping on that front too. But just as we kind of think about this influx of demand, anything to think about on that front? Or you sort of feel comfortable with sort of where utilization levels are and staffing levels and things like that and as we think about like the back half of '26 into 2027? Birgit Girshick: Yes. So we are adding staffing just based on what we expect from demand. So that is always, always. We'll add the staff. We'll get them trained up and make sure they're ready for revenue to pick up. The other investments we're making, I mentioned that a little bit in my remarks, is in lab space and lab expansions. That doesn't have an impact on revenue in 2026, but it will have -- allows us to grow in that area '27 and beyond. So it's very important that we execute on that. I specifically talked about an expansion in Edinburgh, where we are close to one of the universities, which then also helps us with the staffing aspect. We continue to focus also on modernizing our labs, bringing more automation in, increasing the throughput and bringing systems in both digitals as well as lab equipment systems to really drive speed but also utilization in our laboratories. So we will continue to talk about that, how we will modernize the company. It's both for speed and efficiencies. But that is a big focus of ours right now in all segments and all functions. And particularly during our Investor Day, we will deep dive on that a bit more. Operator: Thank you. We'll go next to Ryan Halsted with RBC. Ryan Halsted: My question is just on the guidance raise, if you could just offer some more color on the incremental visibility you have into the bookings that you now expect to convert in the second half. I thought maybe you said this was related to bookings that you've completed the middle of this year? Or is this bookings from prior year? Glenn Coleman: Yes, Ryan, thanks for the question. So, the confidence in the raise to our revenue and EPS is really based upon the bookings we saw come through in Q2. So most of the year now we've got in bookings. We still have to see a book-to-bill of 1 or greater for the rest of the year, but that's largely going to impact 2027. We'll get some benefit from that in the second half of the year. But just given the strength we're seeing in all the key lead indicators, net book-to-bill being one, proposal volumes being a second, capture rate being the third, we feel confident now that we're going to see better performance in the second half of the year. And so the guidance raise for EPS is all associated with revenue, and we raised our organic revenue growth rate by about 150 basis points. Ryan Halsted: Got it. That's helpful. And then my follow-up, just in terms of your modernization initiatives, some of the detail you provided in the prepared remarks was very helpful. But I wanted to ask specifically about NAMs. Any -- should we be looking for kind of collaborations and partnerships with biotech companies that maybe have some interesting innovation in kind of NAMs? Appreciate that. Birgit Girshick: Yes. So we have a very strong NAMs focus and commitment. So we -- last year, we established a Scientific Advisory Board. We hired a leader from the industry to be our Chief Scientific Officer and to particularly focus on NAMs development. And so what we are doing is really focusing on areas where we believe NAMs can have a benefit on the reduction of animals, but also providing more insights, more evidence to our clients. And it's going to be a very broad mix of technologies, assays that we are -- either already have or are developing or in-licensing or partnering with. So you will see probably more internal development, followed by licensing and partnering. So you will probably hear us talk about some of the technologies that we are in-licensing and partnering. And then we also are working with several of our clients on areas where they are interested or where they see the best possible outcomes. So it's ongoing. Again, during our Investor Day, we'll give a deep dive on NAMs development, how we think about it, where we do see opportunities. There will never be a NAMs business for Charles River. It will always be a Safety Assessment business where we're integrating NAMs into our Safety Assessment workflows. And I think that is the strength and that is the only way NAMs can be adopted. And we're in a really good position to be the leader in the integration. And as I said, it will be from multiple sources, multiple technologies, not really focused on one single thing. Operator: Our next question comes from Luke Sergott with Barclays. Luke Sergott: Just wanted to ask about the -- if you guys are seeing any demand pickup from the DoD list in the WuXi on the no [indiscernible] list. I know that was in June, but any signs of early wins or conversations with those customers? Birgit Girshick: Yes. Luke, so generally, most of that work that they're doing is in the early stage like chemistry biology that we are no longer in the business of. So I couldn't tell you specifically if clients are looking for other providers there. But I'm assuming there are. We had a few discussions with clients more in the regulated space. But generally, the Western clients are not yet taking their regulated work to China. And so those discussions are quite limited, but not occurring. So if that's English. So limited, but yes, a little bit. Luke Sergott: Okay. Perfect. And then on the guide with the DSA business and in light of your strong bookings, kind of implies there a decel in the conversion or burn rate. So anything there from a mix perspective or how the projects are shaking out that gives you that decel? Or is that just kind of the conservatism based on what you guys are seeing right now? Birgit Girshick: It's more about the time it takes to go from bookings -- for proposal to bookings, bookings to revenue generating. And then that just will take some time. So some of the work we are doing is still booked -- was booked last year. And what you're seeing now, the demand or the net book-to-bill really will have an impact in the second half into '27. So it's just a matter of timing. Glenn Coleman: And keep in mind, for the first half of the year, DSA had negative organic growth, and now we're projecting low single-digit organic growth in the back half of the year. So we are reflecting some of that improvement here. And obviously, we'd like to see that continue to accelerate going into 2027. Operator: Our final question today comes from Joshua Waldman with Cleveland Research. Joshua Waldman: I'll just keep it to one. Birgit, it sounds like you feel comfortable with existing safety capacity. I mean when you think about your ability to get better utilization on existing capacity, the impact of NHP costs, et cetera, how do the moving pieces leave you feeling on the margin setup into next year? Or I guess, how are you thinking about the margin potential for the business in Q4 and into '27? Birgit Girshick: I think we're going to stay away from comments on 2027. That's a little bit early. There are some areas, obviously, that we already called out, which, for example, the K.F. Cambodia acquisition and divestitures have a positive impact on margin next year, and we can walk you through. But overall, I want to stay away. There's too many variables in play that we still need to work through. For the second half of the year, we called out at least 500 basis points, a big impact in Q4 because of when the nonhuman primates are coming through on the revenue line. But I wouldn't necessarily translate that straight into 2027. So Glenn, you can start... Glenn Coleman: No, no, exactly. Don't take the Q4 run rate and assume that's the run rate going forward. I think year-over-year '27 versus '26, if you look at some of the previous comments we've made, we would expect to see some margin expansion coming from the full impact of divestitures and the Cambodia acquisition. So that will have a tailwind in '27, but we're not ready to yet give guidance on our margins for next year. Operator: We have no further questions in queue. I will now turn the conference back to Todd Spencer for closing remarks. Todd Spencer: Thank you for joining us on the conference call this morning. For those interested in our Investor Day on September 24, please visit the Investor Relations section of our website at ir.criver.com to register for the webcast or contact me for any additional details. This concludes the conference call. Thank you. Operator: Thank you. That does conclude today's Charles River Laboratories Second Quarter 2026 Earnings Call. Thank you for your participation, and you may now disconnect. Before you buy stock in Charles River Laboratories International, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Charles River Laboratories International wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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Interested in Charles River Laboratories International, Inc.? Here are five stocks we like better. Charles River reported a stronger-than-expected second quarter, with organic revenue up 0.1% year over year, non-GAAP EPS of $3.02, and DSA book-to-bill reaching 1.19—the highest in nearly four years. The company raised its 2026 guidance, now expecting flat-to-1% organic revenue growth, non-GAAP EPS of $11.15–$11.45, and free cash flow of $400–$420 million. Portfolio divestitures and lower NHP sourcing costs are expected to support significant second-half margin expansion. Recovery remains uneven across segments: DSA bookings and backlog improved substantially, while Manufacturing margins strengthened after divestitures; RMS revenue continued to decline because of weaker North American small-model and academic demand. The 2 Worst Performing S&P 500 Stocks YTD: Buy, Sell, or Avoid? Charles River Laboratories International (NYSE:CRL) reported second-quarter results that exceeded its prior outlook, citing improved demand in its Discovery and Safety Assessment, or DSA, business and stronger-than-expected manufacturing performance. The company raised its full-year revenue, earnings and free-cash-flow guidance while maintaining a cautious view that the recovery in biopharmaceutical demand will progress gradually. Chief Executive Officer Birgit Girshick said total company organic revenue increased 0.1% year over year, marking the first quarter of organic revenue growth since the third quarter of 2023. Non-GAAP earnings per share totaled $3.02, up 47% sequentially and above the company’s prior expectation for at least 30% sequential growth. → 3 Drone Stocks That Should Soar After the Summer Slump “We were encouraged that the biopharmaceutical demand environment continued to strengthen in the second quarter, particularly in the DSA segment,” Girshick said. DSA net book-to-bill reached nearly 1.2 times, its highest level in almost four years and the third straight quarter above 1.0 times. DSA organic revenue rose 0.2% in the second quarter, ending a stretch of declines that began after the third quarter of 2023. Reported DSA revenue was $607 million, down 1.9% because of the divestiture of certain European discovery sites. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Net DSA bookings increased 12.6% sequentially to $701 million, raising backlog to $1.97 billion. The segment’s net book-to-bill ratio was 1.19 times, supported by both global biopharmaceutical customers and small- and midsize-biotechnology clients. Girshick said the company is beginning to see revenue benefits from bookings made late last year, while more recent booking strength is expected to support additional growth in the second half and into 2027. DSA demand was broad-based across study types and modalities, including increased activity in IND-enabling work and continued demand for non-human-primate, or NHP, studies tied to complex biologics. → Jersey Mike's Serves Fresh Gains After IPO Stumble The company said its ownership of NHP suppliers in Mauritius and Cambodia has strengthened its supply-chain control and competitive position. Girshick said the company can manage NHP availability, shipment timing and quality more directly, though some third-party supply contracts will continue to wind down over the next several years. DSA operating margin was 25.6%, down 180 basis points year over year because of higher study-related direct costs but up 460 basis points sequentially. Chief Financial Officer Glenn Coleman said lower sourcing costs from the company’s Cambodian NHP supplier acquisition are expected to begin benefiting margins in the third quarter and have a more meaningful effect in the fourth quarter as more of those animals are placed on studies. The company completed divestitures of certain European discovery services sites, its CDMO business and its Cell Solutions business during May. Girshick said the moves refined the company’s portfolio around regulated testing capabilities and contributed to a 420-basis-point sequential improvement in consolidated operating margin to 20.5%. Manufacturing revenue was $188 million and rose 1.3% organically. Excluding CDMO, which remained part of the business for a portion of the quarter before its divestiture, the segment grew at a mid-single-digit organic rate. Microbial Solutions delivered high-single-digit organic growth, driven by demand across regions for endotoxin-testing reagents and rapid testing cartridges. Manufacturing operating margin increased 500 basis points year over year to 37.8%, primarily reflecting the CDMO divestiture. Coleman said the segment’s margin could approach 40% in the second half as the company receives the full-period benefit from that transaction. Research Models and Services, or RMS, revenue declined 1.4% organically to $209 million. The decline reflected lower North American small-model volumes and lower revenue from research model services, including genetically engineered models and services. Strong demand from mid-tier biotech and contract research organization clients in China partly offset those declines. Girshick said academic and government demand in North America remained stable but was not growing, with flat National Institutes of Health budgets and slower grant processing affecting the market. The company maintained its expectation for a low- to mid-single-digit organic RMS revenue decline for the year. Charles River raised its 2026 organic revenue outlook to a range of flat to 1% growth, a 150-basis-point improvement from its prior outlook. Reported revenue is now expected to decline 2.5% to 3.5%, largely due to completed divestitures. DSA organic revenue is now expected to grow at a low-single-digit rate for the full year. Manufacturing organic revenue is expected to grow at a low- to mid-single-digit rate. RMS guidance was unchanged, with a low- to mid-single-digit organic decline anticipated. Non-GAAP EPS guidance was raised to $11.15 to $11.45, representing 8% to 11% year-over-year growth. Free cash flow guidance was raised to $400 million to $420 million from $375 million to $400 million. The company maintained its expectation for 120 to 150 basis points of full-year operating-margin expansion. Coleman said management has “a clear line of sight” to at least 500 basis points of margin improvement in the second half compared with the first half, driven by portfolio actions, lower NHP sourcing costs, reduced corporate costs and efficiency initiatives. For the third quarter, Charles River expects reported revenue to decline 4% to 6%, reflecting divestitures, while organic revenue is projected to rise 1% to 3%. It forecast third-quarter non-GAAP EPS of $2.90 to $3.00. Girshick highlighted collaborations with Eli Lilly’s TuneLab drug-discovery platform and Arovella Therapeutics as examples of the company’s strategy to combine traditional testing with newer technologies. Through the Lilly collaboration, Charles River will provide non-clinical testing expertise to help optimize Lilly’s artificial-intelligence and machine-learning drug-discovery model. The company is also expanding bioanalytical laboratory capacity in Scotland at Heriot-Watt University’s Research Park, part of five ongoing global lab-science expansions. Charles River is investing in AI-enabled digital pathology workflows, with a goal of reducing standard pathology timelines by at least one week for clients using its fully integrated solution. Girshick said AI could become a long-term demand tailwind if more efficient molecule design and target identification lead to additional programs reaching validation and regulated safety-assessment stages. She said the timing of a material impact remains difficult to estimate but that AI-native drug discovery companies are already tending to run more programs than typical early-stage biotech clients. Charles River Laboratories International, Inc is a leading provider of research models and preclinical and clinical support services for the pharmaceutical, biotechnology and medical device industries. The company's core offerings include discovery, safety assessment, toxicology, and pathology services, as well as supply of laboratory animals and related diagnostics. Services extend across in vivo and in vitro testing, biologics testing, and support for advanced therapies, helping clients accelerate drug development from early discovery through regulatory submission. Founded in 1947 in Wilmington, Massachusetts, Charles River has grown through strategic investments and acquisitions to establish a broad portfolio of capabilities. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Charles River Laboratories International Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved first positive organic revenue growth since Q3 2023, signaling a sustainable recovery in biopharma demand led by small and mid-sized biotech funding. DSA net book-to-bill reached 1.19x, the highest in nearly four years, driven by a discernible uptick in IND-enabling studies as clients replenish early-stage pipelines. Strategic divestitures of European discovery sites and CDMO businesses successfully streamlined the portfolio to focus on high-value regulated testing solutions. Secured a unique collaboration with Eli Lilly's TuneLab to provide wet lab expertise for optimizing AI and machine learning drug discovery models. Leveraged vertical integration of NHP supply chains in Cambodia and Mauritius to ensure reliable access to critical research models for complex biologics. Implemented 'Pathway to Purpose' framework to modernize operations through digital pathology and AI-enabled workflows, aiming to reduce study timelines by at least one week. Global biopharma demand stabilized as major clients completed multi-year restructuring and pipeline reprioritization activities. Raised full-year 2026 organic revenue guidance to flat-to-1% growth, reflecting improved DSA bookings and Manufacturing segment outperformance. Anticipate at least 500 basis points of margin improvement in the second half of 2026, primarily driven by portfolio refinement and lower NHP sourcing costs. Expect DSA growth to accelerate in the second half of the year as bookings from late 2025 and early 2026 transition through the natural lag into revenue. Manufacturing margins are projected to approach 40% as the full benefit of the CDMO divestiture is realized in the coming quarters. Guidance assumes a $0.20 EPS headwind from a higher tax rate due to proposed legislation changes in Mauritius, largely offsetting a $0.19 deferred compensation gain. RMS segment faces headwinds from flat NIH budgets and slower grant processing, impacting research model volumes in North America. The acquisition of K.F. Cambodia is expected to significantly lower NHP sourcing costs, with the primary margin benefit materializing in Q4 2026. Completed divestitures of non-core assets in May 2026 to improve agility and focus on core competencies in regulated testing. Ongoing site closures and consolidations continue as part of the broader effort to optimize the global operational footprint. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects AI to act as a tailwind by increasing molecule design productivity, leading to more programs requiring validation and safety assessment. Noted that AI-native drug discovery companies typically run more programs than traditional biotechs, though material revenue impact will take 1-2 years to ramp. Management observed a 'wait-and-see' approach from clients regarding China, noting that while early-stage chemistry work remains there, regulated work has not moved to China in a major way. Stated that pricing for Western-facing Chinese CROs is moderating toward parity with Western providers, reducing the historical cost advantage. Ownership of the supply chain allows CRL to control quality, logistics, and capacity, providing clients with schedule certainty that competitors may lack. Confirmed that lower sourcing costs from the Cambodian acquisition will begin benefiting margins in Q3, with the full effect in Q4 as animals clear quarantine. Pricing remains stable but competitive; management is aggressively pursuing work, resulting in a recent uptick in capture rates. Anticipates pricing power may return as industry capacity fills up, though this would not impact the revenue line until 2027 due to backlog timing.

Charles River Laboratories International, Inc. CRL reported second-quarter 2026 company-defined non-GAAP earnings of $3.02 per share, down 3.2% year over year. The reported earnings topped the Zacks Consensus Estimate by 17.6%. GAAP net loss was 3 cents per share compared to GAAP earnings of $1.06 per share in the year-ago period. Revenues of $1.00 billion declined 2.7% (up 0.1% organically) year over year but beat the Zacks Consensus Estimate by 3%. Following the announcement, CRL shares rose 7.9% in the pre-market trading today. DSA revenues totaled $606.5 million, down 1.9% year over year on a reported basis. Organic revenues increased 0.2%, driven mainly by higher study volume for regulated safety assessment services. The segment's GAAP operating margin rose 60 basis points to 20.5%, aided by lower intangible-asset amortization and reduced third-party legal costs tied to a non-human primate supply matter. The non-GAAP margin fell 180 basis points to 25.6% because of higher study-related direct costs. RMS revenues totaled $209.5 million, down 1.8% from the year-ago quarter’s level. Organic revenues declined 1.4% primarily due to lower sales of small research models in North America and weaker research model services, partly offset by growth in China. The segment's GAAP operating margin improved 50 basis points to 17.3%, mainly because of lower amortization following the Cell Solutions divestiture. The non-GAAP margin contracted 80 basis points to 24.5% on lower volume and an unfavorable geographic revenue mix. Manufacturing revenues amounted to $188.1 million, down 6.3% year over year, mainly because of the CDMO divestiture. Organic revenues rose 1.3%, supported by higher revenues in the Microbial Solutions business. GAAP operating margin surged to 34.9% from 6.0% a year earlier. The non-GAAP margin expanded 500 basis points to 37.8%, with the CDMO business and the benefit from its divestiture driving the improvement. The gross profit in the reported quarter was $363.4 million, up 1.8% from the prior-year quarter’s level. The gross margin of 36.2% expanded approximately 159 basis points (bps) year over year. Selling, general & administrative expenses increased 19.5% year over year to $228.9 million. Operating profit totaled $119.9 million, up 19.7% from the prior-year quarter’s level. The operating margin expanded approximately 224 bps to 11.9%. Charles River Laboratories International, Inc. price-consensus-eps-surprise-chart | Charles River Laboratories International, Inc. Quote Cash and cash equivalents amounted to $192.0 million as of June 27, 2026, compared with $191.8 million at the end of the first quarter. Cumulative net cash provided by operating activities at the end of the quarter was $220.8 million compared with $376.3 million a year ago. CRL repurchased 0.6 million shares for $100 million during the second quarter at an average price of $174 per share. Year-to-date repurchases totaled $300 million, leaving $700 million available under the company's authorization. Charles River now expects reported revenues to decline 3.5% to 2.5% in 2026, compared with its prior projection for a 5.5% to 4.0% decrease. The Zacks Consensus Estimate for 2026 revenues implies a decline of 4.2% year over year. The company raised its non-GAAP earnings guidance to $11.15-$11.45 per share from $10.80-$11.30.  The Zacks Consensus Estimate for the metric is pegged at $11.05 per share. Charles River exited the second quarter of 2026 with earnings and revenues beating estimates. Reported revenue decline reflected the effects of completed divestitures. Organic growth increased due to gains in DSA and Manufacturing offset weakness in RMS. However, the expansion of both margins in the quarter looks encouraging. On a positive note, Charles River raised its 2026 financial outlook driven by improving demand trends in the DSA segment and better-than-expected performance in the Manufacturing segment. Charles River currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Quest Diagnostics DGX and Medpace MEDP. Intuitive Surgical, carrying a Zacks Rank #2 at present, reported second-quarter 2026 adjusted EPS of $2.80, which surpassed the Zacks Consensus Estimate by 12.9%. Revenues of $2.89 billion beat the Zacks Consensus Estimate by 3.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. ISRG has an earnings yield of 3.1% compared to the industry’s negative 3% yield. The company beat earnings estimates in each of the trailing four quarters, the average surprise being 16.53%. Quest Diagnostics, carrying a Zacks Rank #2 at present, posted second-quarter 2026 adjusted EPS of $3.12, exceeding the Zacks Consensus Estimate by 11%. Revenues of $3.04 billion topped the Zacks Consensus Estimate by 2.1%. DGX has an earnings yield of 4.7%, almost in line with the industry’s yield. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 5.77%. Medpace, carrying a Zacks Rank #2 at present, posted second-quarter 2026 adjusted EPS of $4.25, exceeding the Zacks Consensus Estimate by 4.17%. Revenues of $707.3 million outperformed the consensus mark by 1.12%. MEDP has a historical five-year earnings growth rate of 30.5% compared with the industry’s 5.6% growth. In the trailing four quarters, the company delivered an average earnings beat of 10.16%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report Intuitive Surgical, Inc. (ISRG) : Free Stock Analysis Report Medpace Holdings, Inc. (MEDP) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Release Date: August 05, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Charles River Laboratories International Inc (NYSE:CRL) exceeded its second-quarter financial targets, with organic revenue growth of 0.1%, the first improvement since Q3 2023, and raised its full-year guidance. The DSA segment showed strong demand recovery, with a net book-to-bill of 1.19x, the highest in nearly four years, and the third consecutive quarter above 1.0x, indicating robust future revenue. Strategic portfolio refinements, including divestitures of CDMO and certain European sites, drove a 420 basis point sequential operating margin improvement to 20.5% and are expected to contribute to at least 500 basis points of margin expansion in the second half. The acquisition of the Cambodian NHP supplier is expected to lower sourcing costs, providing a significant margin benefit in Q4 and a competitive advantage in NHP-related safety assessment studies. The company is investing in growth areas like bioanalysis and digital pathology, and has formed key collaborations with Eli Lilly and Aravela Therapeutics, positioning it for future innovation and client-centric growth. Biopharma demand is sustainably improving, supported by strong biotech funding of nearly $100 billion, leading to increased bookings and proposal activity across both small/mid-sized biotech and global biopharma clients. The RMS segment continues to face headwinds, with organic revenue declining 1.4% in Q2, driven by lower volumes in North America and constrained spending from academic and government clients due to flat NIH budgets. The DSA segment's year-over-year operating margin declined by 180 basis points in Q2 due to higher study-related direct costs, though this is expected to improve in the coming quarters. The company faces a higher non-GAAP tax rate for the year, increased by approximately 100 basis points to 23%-24%, due to proposed tax legislation changes in a foreign jurisdiction, creating a $0.20 EPS headwind. Unallocated corporate costs were higher than expected in Q2, totaling $72 million or 7.2% of revenue, driven by increased deferred compensation plan costs, and the full-year outlook for these costs was raised to 6.0% of revenue. The recovery in the DSA segment is expected to be gradual, with organic growth only projected at low single digits for 2026, as it takes several quarters for bookings to convert into revenue. Pricing in the market has not yet materially improved, remaining stable, and any potential pricing uptick is not expected to flow through to revenue until 2027. Warning! GuruFocus has detected 8 Warning Signs with CRL. Is CRL fairly valued? Test your thesis with our free DCF calculator. Q: Can you talk about your expectations for the preclinical pipeline evolving from AI-driven drug discovery and when that impact starts showing up in numbers via IND-enabling studies? A: Birgit Gershik (CEO): AI is a tailwind for us. As AI improves molecule design and target identification, it makes more molecules available to move into the regulated safety assessment stage, which is core to us. We are already seeing that AI-native drug discovery companies generally run more programs than typical biotechs. While the numbers are still small, we expect this to accelerate materially over the next year or two. We are also investing in AI tools to drive efficiencies and differentiate ourselves, helping clients move faster. The timing of when this becomes material is hard to estimate, but it will be a positive impact over the next few years. Q: Is it fair to assume you're now comfortable with the current shape of the business after the portfolio refinement? What is your appetite for more deals or divestitures and your broader capital allocation strategy? A: Birgit Gershik (CEO) & Glenn Coleman (CFO): We are absolutely seeing the benefits from the divestitures, both financially and in our ability to focus on the core portfolio. We continue to look at our portfolio and have a healthy appetite for M&A, though nothing is imminent on divestitures. We are still executing on previously announced site closures. From a capital allocation perspective, our balance sheet is in very good shape with leverage around 2.5 times. We have plenty of capacity to support our acquisition strategy and would love to add a couple of companies to the portfolio. Q: You talked about demand accelerating in biotech. Can you talk about your other customer segments, especially how large biopharma is doing? A: Birgit Gershik (CEO): It's great to see that both major client segments are strengthening. Most of our global biopharma clients have moved through their portfolio prioritization and restructurings. Over the last 18 months, we've seen them coming back to work with more bookings, more discussions, and fewer cancellations. Their focus is on getting more molecules into the clinic and approved. We believe we are the differentiated partner to help them execute on that. Q: Can you talk about the demand landscape by study type and the availability of NHPs from your acquisitions, and how much excess capacity you can dip into to service the growing NHP demand? A: Birgit Gershik (CEO): We are seeing a shift from more post-IND work to more pre-IND work, which is a good sign that clients are reinvesting in early-stage R&D. There is also healthy demand in more complex modalities, which provides a nice uptick in revenue opportunity. Regarding NHP supply, by owning the farms in Mauritius and Cambodia, we control the quality, logistics, timing, and capacity. We can breed more, accelerate shipments, or hold them back. We still have third-party contracts that are ramping down, and we will move more of those animals into client studies. We are in a very healthy state and see this as a possibility to gain market share. Q: Can you talk about the cadence of the KF (Cambodia) benefit materializing in margins? Is it landing mostly in Q4 rather than Q3? A: Glenn Coleman (CFO): We expect a minimal impact in Q3, but the large impact will be in Q4. We expect a very meaningful move in DSA margins in the fourth quarter as a result of the NHPs being placed on studies and direct costs going lower. Birgit Gershik (CEO) added that the timing is due to the importation, quarantine, acclimation, and getting them on study to generate revenue. Q: Can you comment on your capacity to support the DSA strength and whether you need to make incremental investments to absorb the funding flow-through? A: Birgit Gershik (CEO): Because of volume declines over the last few years, we have sufficient capacity for a while. We don't see any issues from an in vivo perspective. From a lab perspective, we have expansions in progress geared toward future demand. We are comfortable with our capacity, and utilization will improve, but we don't see a bottleneck. Q: On pricing, both for NHPs and more broadly, what did you see in Q2 and what are your expectations for the second half? A: Birgit Gershik (CEO): Pricing has not materially improved yet; it is stable at levels seen over the last few years. We are aggressive going after work, which shows in our capture rates, which have seen a nice uptick. We look forward to when pricing becomes more available as capacity fills up. Any pricing uptick we might see in upcoming quarters would flow through in 2027, not before. Q: Can you elaborate on NHP-related safety assessment studies becoming a competitive advantage and how much higher your share could go? A: Birgit Gershik (CEO): Share is hard to estimate because many competitors are private. We look at capture rates, which have had a nice uptick over the last few months, though I wouldn't call it a trend yet. By being in control of the NHP supply chain, we give clients assurance that they can run their studies when needed without time delays. This is a big benefit we bring to the marketplace and is deepening our client relationships. Q: Can you talk about the mix of services within the strong bookings? Are you seeing incremental demand in certain places within DSA? A: Birgit Gershik (CEO): We are seeing a shift from more post-IND work to more pre-IND work. Over the last few years, post-IND had a heavier component due to funding availability. In the last quarter, we saw that pivoting back to pre-IND work, which is great to see. We need both for optimal profitability and capacity utilization. Pre-IND work leads into later-stage, more complex, and more specialty work, which is a good sign that the market is strengthening. Q: Can you offer more color on the incremental visibility you have into the bookings that you now expect to convert in the second half? A: Glenn Coleman (CFO): The confidence in the raise is based upon the bookings we saw come through in Q2. We still have to see a book-to-bill of one or greater for the rest of the year, but that will largely impact 2027. Given the strength in key lead indicatorsnet book-to-b For the complete transcript of the earnings call, please refer to the full earnings call transcript.

The second-quarter 2026 earnings season is in full swing, with several MedTech companies already reporting results. According to the latest Earnings Preview, the Medical sector is likely to have witnessed favorable demand trends for products and services, driven by AI-backed innovations and expansion into strategic, high-growth adjacencies and global markets. Consumerism trends, including increased demand for choice, convenience and transparency, may have continued to create opportunities to broaden patient-centric offerings. However, macroeconomic headwinds, including geopolitical tensions, tariffs, labor shortages and supply-chain disruptions, are expected to have weighed on performance. Going by the broader Medical sector’s scorecard, 32.2% of the companies in the sector, constituting 35.9% of its market capitalization, reported earnings till July. 29. Earnings grew 18.1% year over year on revenue growth of 6.8%. Of the total index members, 94.7% reported a beat on earnings and revenues. Overall, second-quarter earnings of the Medical sector are expected to decline 15.2% despite 6.1% revenue growth. This compares with the first-quarter earnings fall of 2.3% on revenue growth of 7.1%. Based on the latest trends, the Medical sector is one of the three sectors predicted to earn less in the second quarter of 2026 compared with the year-ago period. Some prominent companies, including Zimmer Biomet ZBH, Charles River Laboratories CRL and Bio-Techne Corp. TECH, are next in line to report their quarterly results. The MedTech sector has consistently been fueled by innovation, with companies leveraging new technologies to improve patient outcomes and capture market share. The growing adoption of AI-enabled diagnostics and instruments, particularly across oncology, neuroscience and cardiovascular care, is expected to have supported quarterly revenues. For instance, GE HealthCare reported strong order growth in the second quarter of 2026, with broad-based contributions from ultrasound, MR, CT, patient monitoring, radiopharmaceuticals and interventional labs, underscoring strong global demand for its differentiated technologies. Intuitive Surgical also reported roughly 16% year-over-year growth in worldwide procedures, with Ion endoluminal system procedures climbing 36%. MedTech companies are increasingly pursuing strategic M&A to strengthen their portfolios and expand into fast-growing, emerging markets. Abbott’s Cancer Diagnostics business, created following the Exact Sciences deal, grew 13%, driven by mid-teens growth in the Cologuard colorectal cancer screening test. Companies such as Labcorp and Quest Diagnostics continue to benefit from the growing role of laboratory services across drug development and patient care, supporting earlier disease detection, diagnosis, treatment selection and ongoing disease monitoring. Companies operating in the fast-growing, global automated insulin delivery (AID) market are likely to have benefited from strong demand for their flagship products, supported by new customer additions and high retention rates. Ongoing cost-efficiency initiatives, enterprise-wide restructuring and footprint optimization efforts are also expected to influence quarterly results. Still, the industry continues to grapple with broader economic pressures. Geopolitical tensions are straining global supply chains, leading to price volatility of critical raw materials and components. Trade tensions between the United States and China, along with increased tariffs between the United States and other trading partners, are likely to pressure operating results. Zimmer Biomet: In the second quarter of 2026, the company's U.S. hip franchise is expected to have continued benefiting from the growing adoption of its hip triple-play: Z1 Femoral Hip Stem, the OrthoGrid AI-based hip navigation platform and the HAMMR surgical impactor. Within the Knees segment, the U.S. knee franchise is likely to have continued to benefit from strong demand for the Oxford Partial Cementless Knee. The Paragon 28 acquisition may support the S.E.T. (Sports Medicine, Upper Extremities, Foot and Ankle; Trauma, Craniomaxillofacial and Thoracic)segment’sresults. (Read more: Zimmer Biomet Set to Report Q2 Earnings: What's in the Cards?) The Zacks Consensus Estimate for the company’s second-quarter adjusted earnings per share (EPS) stands at $2.01, implying a 2.9% decrease year over year. The Zacks Consensus Estimate for revenues is pegged at $2.13 billion, suggesting an improvement of 2.5% from the prior-year quarter’s reported number. During the second quarter, the company’s shares fell 5.4% compared with the industry’s 10.2% decline. Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates. This is not the case here, as you can see below. You can see the complete list of today’s Zacks #1 Rank stocks here. ZBH has an Earnings ESP of -0.94% and a Zacks Rank of #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Zimmer Biomet Holdings, Inc. price-eps-surprise | Zimmer Biomet Holdings, Inc. Quote Charles River Laboratories: In the second quarter of 2026, the company’s Research Models and Services (“RMS”) segment is likely to have faced pressure from lower sales of small models and research model services. Discovery Services revenues are likely to have declined in the second quarter, partly as a result of site consolidation activities. On a positive note, the Microbial Solutions business may have witnessed another solid performance, aided by the Endosafe and Celsis manufacturing quality control testing platforms. (Read more: Charles River Prepares to Report Q2 Earnings: What's in Store?) The Zacks Consensus Estimate for Charles River’s second-quarter EPS suggests a 12.8% decrease year over year to $2.72. The Zacks Consensus Estimate for revenues currently stands at $970.8 million, indicating a 6% decline compared with the year-ago period. During the second quarter, the stock climbed 29.6% compared with the industry’s 9.1% growth. CRL has an Earnings ESP of +0.33% and a Zacks Rank #2. Charles River Laboratories International, Inc. price-eps-surprise | Charles River Laboratories International, Inc. Quote Bio-Techne: In the fourth quarter of fiscal 2026, the company’s protein analytical instrumentation business might have continued to demonstrate strong momentum, driven by the Ella benchtop immunoassay platform. Bio-Techne is also expected to have experienced continued traction across the biologic characterization portfolio led by the Maurice platform. Its Diagnostics business remains susceptible to quarter-to-quarter volatility due to its concentration of large customers. (Read more: Bio-Techne's Q4 Earnings on Deck: What's in Store for the Stock?) The Zacks Consensus Estimate for Bio-Techne’s fiscal fourth quarter EPS suggests a 1.9% decrease to 52 cents. The Zacks Consensus Estimate for revenues indicates 0.1% year-over-year growth to $317.2 million. During the fourth quarter, the company's shares rose 32.1% compared with the industry’s 2% growth. TECH has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). Bio-Techne Corp price-eps-surprise | Bio-Techne Corp Quote Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report Bio-Techne Corp (TECH) : Free Stock Analysis Report Zimmer Biomet Holdings, Inc. (ZBH) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Charles River Laboratories International, Inc. CRL is scheduled to report second-quarter 2026 results on Aug. 5, before market open. In the last reported quarter, the company’s adjusted earnings per share (EPS) of $2.06 surpassed the Zacks Consensus Estimate by 5.1%. Charles River beat estimates in each of the trailing four quarters, delivering an average earnings surprise of 9.31%. The Zacks Consensus Estimate for the company’s second-quarter revenues is pegged at $970.8 million, suggesting a 5.9% decline from the year-ago reported figure. The Zacks Consensus Estimate for EPS projects a decrease of 12.8% year over year to $2.72. The estimate has dropped 1.1% in the past 30 days. Let’s briefly review the company’s performance leading up to the announcement. In the second quarter of 2026, the segment likely faced pressure from lower sales of small models and research model services. The first-quarter headwind from the timing of NHP shipments, affecting large model revenues, is expected to have eased, consistent with management’s expectations. Meanwhile, lower volumes in North America may have continued to weigh on small model revenues, as in-house research activity among large pharma and midsized biotech clients is yet to fully recover. In addition, subdued demand from early-stage biotech clients likely kept occupancy levels at Charles River Accelerator and Development Lab (CRADL) constrained, weighing on RMS revenue growth. On the positive side, demand for small models in China from mid-tier biotech and CRO clients likely remained solid. During the quarter, Charles River launched an enhanced In Vitro Fertility (IVF) service bundle to accelerate rat-model programs across therapeutic areas, including oncology, neurology, cardiology, and metabolic. The offering provides researchers with a new avenue to advance drug development research and help bring treatments to patients faster. Our model estimates that Charles River’s RMS business revenues will decrease 5.5% in the second quarter of 2026. For the past several quarters, Charles River has been navigating a challenging demand environment within this segment. Discovery Services revenues are likely to have declined in the second quarter, partly as a result of site consolidation activities. Earlier this year, the company signed a definitive agreement to divest certain European assets within this business to IQVIA Holdings Inc. for roughly $145 million in cash, subject to customary closing adjustments.  The transaction was expected to close during the second quarter of 2026. Charles River Laboratories International, Inc. price-eps-surprise | Charles River Laboratories International, Inc. Quote Meanwhile, Safety Assessment services likely continued to generate stable revenues. The acquisition of K.F. Cambodia’s assets earlier this year, now Charles River Cambodia, is expected to have strengthened and secured the company’s NHP supply chain for its Safety Assessment operations. Management also indicated that the overall DSA demand environment was tracking in line with its expectations, as reflected in a net book-to-bill of 1.04x and a slight sequential increase in backlog at the end of the first quarter. Net bookings remained above the $600 million threshold, supported by continued strength from the small and mid-sized biotech client base. Demand trends for global biopharmaceutical clients remained moderately below year-over-year levels, while healthy proposal activity in the first quarter signaled continued improvement in bookings momentum. All these trends are expected to have influenced the second-quarter performance as well. Per our model estimate, Charles River’s DSA business revenues are expected to decline 5.5% year over year. Within this, the Microbial Solutions business likely delivered another solid performance, aided by the Endosafe and Celsis manufacturing quality control testing platforms. Underlying demand for both Microbial Solutions and Biologics Testing may have remained healthy, with clients continuing to advance their late-stage development and commercial programs. Further, the segment’s profitability is also expected to have benefited from higher revenues and benefits from ongoing cost-saving efforts. A key development occurred in May 2026, when the company completed the sale of its contract development and manufacturing products and services (“CDMO”) and Cell Solutions businesses to GI Partners (GI) for future contingent performance-based payments up to $50.0 million, subject to certain customary closing adjustments. The completed divestiture is expected to have reduced Manufacturing Solutions revenues in the second quarter. Our model estimates segment revenues to decrease 8.2% year over year. Per our proven model, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, have a higher chance of beating estimates, which is the case here: Earnings ESP: Charles River has an Earnings ESP of +1.43%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Zacks Rank: Charles River currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 stocks here. Here are some medical stocks worth considering, as these also have the right combination of elements to post an earnings beat this time: CVS Health CVS has an Earnings ESP of +1.42% and a Zacks Rank #2. The company is slated to release second-quarter 2026 results on Aug. 5. CVS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 16.79%. The Zacks Consensus Estimate for the company’s second-quarter EPS indicates an increase of 3.3% from the year-ago quarter’s figure. Cardinal Health CAH has an Earnings ESP of +1.24% and a Zacks Rank #2. The company is slated to release fourth-quarter fiscal 2026 results on Aug. 11. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 10.27%. The Zacks Consensus Estimate for the company’s fourth-quarter EPS calls for a rise of 16.4% from the year-ago quarter’s figure. Cencora, Inc. COR has an Earnings ESP of +1.49% and a Zacks Rank #2. The company is slated to release third-quarter fiscal 2026 results on Aug. 5. COR’s earnings beat estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 1.59%. The Zacks Consensus Estimate for the company’s third-quarter EPS implies an increase of 9.3% from the year-ago quarter’s figure. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report Cardinal Health, Inc. (CAH) : Free Stock Analysis Report CVS Health Corporation (CVS) : Free Stock Analysis Report Cencora, Inc. (COR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Wall Street expects a year-over-year increase in earnings on higher revenues when Progyny (PGNY) reports results for the quarter ended June 2026. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on August 6. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This provider of fertility and family building benefits is expected to post quarterly earnings of $0.51 per share in its upcoming report, which represents a year-over-year change of +6.3%. Revenues are expected to be $349.19 million, up 4.9% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 7.14% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that the direction of estimate revisions by each of the covering analysts may not always get reflected in the aggregate change. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. Our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction) -- has this insight at its core. The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Progyny, the Most Accurate Estimate is lower than the Zacks Consensus Estimate, suggesting that analysts have recently become bearish on the company's earnings prospects. This has resulted in an Earnings ESP of -1.96%. On the other hand, the stock currently carries a Zacks Rank of #1. So, this combination makes it difficult to conclusively predict that Progyny will beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Progyny would post earnings of $0.44 per share when it actually produced earnings of $0.50, delivering a surprise of +13.64%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Progyny doesn't appear a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Charles River Laboratories (CRL), another stock in the Zacks Medical Services industry, is expected to report earnings per share of $2.72 for the quarter ended June 2026. This estimate points to a year-over-year change of -12.8%. Revenues for the quarter are expected to be $970.77 million, down 6% from the year-ago quarter. Over the last 30 days, the consensus EPS estimate for Charles River has been revised 0.7% up to the current level. Nevertheless, the company now has an Earnings ESP of +1.43%, reflecting a higher Most Accurate Estimate. This Earnings ESP, combined with its Zacks Rank #2 (Buy), suggests that Charles River will most likely beat the consensus EPS estimate. The company beat consensus EPS estimates in each of the trailing four quarters. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Progyny, Inc. (PGNY) : Free Stock Analysis Report Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

The market expects Charles River Laboratories (CRL) to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended June 2026. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on August 5. On the other hand, if they miss, the stock may move lower. While management's discussion of business conditions on the earnings call will mostly determine the sustainability of the immediate price change and future earnings expectations, it's worth having a handicapping insight into the odds of a positive EPS surprise. This medical research equipment and services provider is expected to post quarterly earnings of $2.72 per share in its upcoming report, which represents a year-over-year change of -12.8%. Revenues are expected to be $970.77 million, down 6% from the year-ago quarter. The consensus EPS estimate for the quarter has been revised 0.72% higher over the last 30 days to the current level. This is essentially a reflection of how the covering analysts have collectively reassessed their initial estimates over this period. Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by each of the covering analysts. Price, Consensus and EPS Surprise Estimate revisions ahead of a company's earnings release offer clues to the business conditions for the period whose results are coming out. This insight is at the core of our proprietary surprise prediction model -- the Zacks Earnings ESP (Expected Surprise Prediction). The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a more recent version of the Zacks Consensus EPS estimate. The idea here is that analysts revising their estimates right before an earnings release have the latest information, which could potentially be more accurate than what they and others contributing to the consensus had predicted earlier. Thus, a positive or negative Earnings ESP reading theoretically indicates the likely deviation of the actual earnings from the consensus estimate. However, the model's predictive power is significant for positive ESP readings only. A positive Earnings ESP is a strong predictor of an earnings beat, particularly when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP. Please note that a negative Earnings ESP reading is not indicative of an earnings miss. Our research shows that it is difficult to predict an earnings beat with any degree of confidence for stocks with negative Earnings ESP readings and/or Zacks Rank of 4 (Sell) or 5 (Strong Sell). For Charles River, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become bullish on the company's earnings prospects. This has resulted in an Earnings ESP of +1.43%. On the other hand, the stock currently carries a Zacks Rank of #2. So, this combination indicates that Charles River will most likely beat the consensus EPS estimate. While calculating estimates for a company's future earnings, analysts often consider to what extent it has been able to match past consensus estimates. So, it's worth taking a look at the surprise history for gauging its influence on the upcoming number. For the last reported quarter, it was expected that Charles River would post earnings of $1.96 per share when it actually produced earnings of $2.06, delivering a surprise of +5.10%. Over the last four quarters, the company has beaten consensus EPS estimates four times. An earnings beat or miss may not be the sole basis for a stock moving higher or lower. Many stocks end up losing ground despite an earnings beat due to other factors that disappoint investors. Similarly, unforeseen catalysts help a number of stocks gain despite an earnings miss. That said, betting on stocks that are expected to beat earnings expectations does increase the odds of success. This is why it's worth checking a company's Earnings ESP and Zacks Rank ahead of its quarterly release. Make sure to utilize our Earnings ESP Filter to uncover the best stocks to buy or sell before they've reported. Charles River appears a compelling earnings-beat candidate. However, investors should pay attention to other factors too for betting on this stock or staying away from it ahead of its earnings release. Ardent Health, Inc. (ARDT), another stock in the Zacks Medical Services industry, is expected to report earnings per share of $0.17 for the quarter ended June 2026. This estimate points to a year-over-year change of -67.3%. Revenues for the quarter are expected to be $1.59 billion, down 3.3% from the year-ago quarter. The consensus EPS estimate for Ardent Health, Inc. has been revised 2.1% higher over the last 30 days to the current level. However, a higher Most Accurate Estimate has resulted in an Earnings ESP of +5.00%. This Earnings ESP, combined with its Zacks Rank #3 (Hold), suggests that Ardent Health, Inc. will most likely beat the consensus EPS estimate. Over the last four quarters, the company surpassed consensus EPS estimates three times. Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Charles River Laboratories International, Inc. (CRL) : Free Stock Analysis Report Ardent Health, Inc. (ARDT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research