Charles River Activists Win!

This morning, Charles River Laboratories (NYSE: CRL) announced it was giving in to shareholder demands and abandoning its acquisition of WuXi PharmaTech (NYSE: WX). 

You’ll recall that we got into the position because activist investor Jana Partners was leading a revolt among large institutional shareholders, who were against the pricey buyout. We believed the activists would prevail and the stock would return to the $40 level, where it traded before the deal was announced in April.

Additionally, Charles River announced a new $500 million share buy back program.

These are both fantastic developments for shareholders. Unfortunately, the market isn’t reacting to the news. Investors may be a bit gun-shy after competitor Covance (NYSE: CVD) lowered its outlook for 2010 yesterday.

Charles River reports earnings Monday morning. If the numbers are good, investors’ fears should be put to rest and the stock can begin its ascent back to $40.
 
Below are the consensus estimates for Charles River. We want to see the company meet or exceed the second-quarter forecast and issue guidance that at least meets the third-quarter and full-year projections.

• Second quarter – earnings of $0.50 per share in the second quarter on revenue of $305.56 million.
• Third quarter – EPS of $0.60 on $306.85 million in revenue.
• Full year 2010 – $2.19 in earnings on $1.24 billion in revenue.

I’ll be back to you Monday with my thoughts on earnings and the company’s conference call. Have a great weekend.

Good investing,

Marc Lichtenfeld

Takeover Target Portfolio

Stock: Charles River Laboratories (NYSE: CRL)
Recommended Date: 7/12/10
Recommended Price: $34.50
Current Price: $31.99
Comments: Buy for $36 or less.  Sell stop is $27

Stock: Applied Signal Technology (Nasdaq; APSG)
Recommended Date: 7/8/2010
Recommended Price: $20.01
Current Price: $20.59
Comments: Buy for $20.50 or less. Sell stop is $14.50

Stock: Endologix (Nasdaq: ELGX)
Recommended Date: 6/4/2010
Recommended Price: $5.00
Current Price: $4.58
Comments: Buy for $5 or less. Sell stop is $3.25.

Stock: Qiagen (NYSE: QGEN)
Recommended Date: 3/25/2010
Recommended Price: $23.19
Current Price: $18.58
Comments: Hold.  Sell stop is $17.50.