Charles River Laboratories International (NYSE:CRL) raised its 2026 revenue and earnings outlook after third-quarter organic revenue growth accelerated to 4.7%, supported by demand for safety assessment and manufacturing testing services.
Non-GAAP earnings per share rose 27.2% to $3.09, exceeding the company’s prior forecast of $2.90 to $3.00. Organic revenue growth also surpassed its previous outlook of 1% to 3%. The non-GAAP operating margin expanded 330 basis points from a year earlier to 23%.
Chief Executive Officer Birgit Girshick said improving biopharmaceutical demand and the company’s strategic initiatives are supporting growth. She also noted that some areas, including early-stage biotech activity and demand from academic and government clients, have yet to recover.
Safety assessment bookings support growth outlook
Revenue in the Discovery and Safety Assessment, or DSA, segment increased 5.9% organically to $596 million. Chief Financial Officer Glenn Coleman attributed the growth to higher volumes of regulated safety assessment work, including studies involving non-human primates, and demand for bioanalytical services.
DSA net bookings rose 32% year over year to $652 million, resulting in a net book-to-bill ratio of 1.09. It was the fourth consecutive quarter above 1, with the ratio averaging approximately 1.1 over that period. The segment’s backlog increased both sequentially and year over year to $2.03 billion.
Girshick said proposal activity increased for a fifth consecutive quarter and that booking trends were consistent with the company’s long-term target of 5% to 7% organic growth for DSA. Charles River expects mid-single-digit organic growth in the segment again in the fourth quarter.
The DSA operating margin increased 140 basis points to 26.8%, helped by higher study volumes and lower sourcing costs for non-human primates from Cambodia. Coleman expects further sequential margin improvement in the fourth quarter from sourcing and lower fringe benefit costs.
Charles River is reducing discounts in some DSA proposals while maintaining its proposal capture rate, Girshick said. She cautioned that any pricing benefit would take time to work through the backlog and was unlikely to be significant before the second half of 2027. Coleman said pricing had not yet benefited third-quarter bookings.
Manufacturing rebounds as research models remain soft
Manufacturing revenue rose 7.4% organically to $179 million, with similar growth in microbial solutions and biologics testing. The segment’s operating margin reached 38.6%, up nearly 1,200 basis points year over year, primarily reflecting the full-quarter benefit of the contract development and manufacturing business divestiture and higher revenue.
Coleman said the company expects the manufacturing margin to approach 40% in the fourth quarter. Charles River also placed nine automated Endosafe Nexus instruments during the third quarter, which it expects to support future cartridge demand.
Research Models and Services, or RMS, revenue declined 0.6% organically to $208 million. Lower small-model volumes in North America and the timing of non-human primate shipments to third parties were largely offset by double-digit growth in small models in China and higher revenue from insourcing services.
Girshick said academic and government clients account for nearly 40% of RMS revenue. Uncertainty around government funding remains a headwind, while the company’s CRADL operations have not returned to growth amid a slow recovery in new biotech company formation.
Full-year guidance raised
Charles River now expects at least 1.5% organic revenue growth in 2026, an increase of 100 basis points from its previous outlook. It raised its non-GAAP earnings forecast by 15 cents at the midpoint to $11.35 to $11.55 per share.
The company expects reported revenue to decline 1.5% to 2% for the year because of completed divestitures. It maintained its outlook for operating margin expansion of approximately 120 to 150 basis points and free cash flow of $400 million to $420 million.
For the fourth quarter, Coleman expects high-single-digit organic growth in manufacturing and a modest reduction in the RMS growth rate. The company anticipates non-GAAP earnings per share growth of approximately 30% to 40% year over year.
Looking ahead, Coleman said Charles River expects gradual organic growth improvement in 2027 and, if favorable market trends continue, growth within its 5% to 7% target range beginning in 2028. The company plans to provide 2027 guidance with its fourth-quarter results in February.
AI and modernization plans
Girshick said she expects artificial intelligence to increase the number of drug programs progressing into regulated safety testing, although she said it is difficult to separate AI-related work from other bookings. AI-designed molecules face the same regulatory requirements as other programs, she said.
The company is also pursuing its “Create the Future” transformation program, which it expects to generate more than $300 million in cumulative savings over four years. Initiatives include an automated endotoxin cartridge manufacturing suite that increased production capacity by 14% and a digital laboratory workflow capability developed with Autolomous.
In bioanalysis, Charles River has five organic expansions underway to increase capacity for preclinical and clinical work, Girshick said. She added that the company has capacity available for in vivo work for at least a couple of years, depending on growth, study mix and geography.
About Charles River Laboratories International (NYSE:CRL)
Charles River Laboratories International, Inc is a contract research and laboratory services company that supports pharmaceutical, biotechnology, medical device and academic research organizations. The company provides products and services used throughout the drug-development process, from early discovery and research through preclinical testing and manufacturing support.
Its offerings include research models, laboratory animal management, discovery and safety assessment services, toxicology testing, bioanalysis, and support for biologic, cell and gene therapy programs.
