Fortrea's (NASDAQ:FTRE) Q1: Strong Sales, Full-Year Outlook Slightly Exceeds Expectations

Clinical research company Fortrea Holdings (NASDAQ:FTRE) beat Wall Street's revenue expectations in Q1 CY2025, but sales fell by 1.6% year on year to $651.3 million. The company's full-year revenue guidance of $2.5 billion at the midpoint came in 0.7% above analysts' estimates. Its non-GAAP profit of $0.02 per share was significantly above analysts' consensus estimates.
Is now the time to buy Fortrea? Find out in our full research report.
CEO Thomas Pike is stepping down
Revenue: $651.3 million vs analyst estimates of $608 million (1.6% year-on-year decline, 7.1% beat)
Adjusted EPS: $0.02 vs analyst estimates of -$0.07 (significant beat)
Adjusted EBITDA: $205.7 million vs analyst estimates of $22.14 million (31.6% margin, significant beat)
The company reconfirmed its revenue guidance for the full year of $2.5 billion at the midpoint
EBITDA guidance for the full year is $185 million at the midpoint, above analyst estimates of $172.7 million
Operating Margin: -79.9%, down from -5.6% in the same quarter last year
Free Cash Flow was -$127.1 million compared to -$34.9 million in the same quarter last year
Market Capitalization: $556.8 million
'Fortrea's first quarter performance represents a solid start to 2025,' said Tom Pike, Chairman and CEO of Fortrea.
Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ:FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.
Reviewing a company's long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Fortrea's demand was weak and its revenue declined by 4.4% per year. This was below our standards and is a sign of poor business quality.
Long-term growth is the most important, but within healthcare, a stretched historical view may miss new innovations or demand cycles. Fortrea's recent performance shows its demand remained suppressed as its revenue has declined by 5.6% annually over the last two years.
This quarter, Fortrea's revenue fell by 1.6% year on year to $651.3 million but beat Wall Street's estimates by 7.1%.
Looking ahead, sell-side analysts expect revenue to decline by 7.3% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.
Today's young investors likely haven't read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Fortrea's high expenses have contributed to an average operating margin of negative 2.4% over the last four years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It's hard to trust that the business can endure a full cycle.
Looking at the trend in its profitability, Fortrea's operating margin decreased by 27.9 percentage points over the last four years. This performance was caused by more recent speed bumps as the company's margin fell by 31.2 percentage points on a two-year basis. We're disappointed in these results because it shows its expenses were rising and it couldn't pass those costs onto its customers.
This quarter, Fortrea generated a negative 79.9% operating margin. The company's consistent lack of profits raise a flag.
We track the change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth is profitable.
Sadly for Fortrea, its EPS declined by 45.7% annually over the last three years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
In Q1, Fortrea reported EPS at $0.02, up from negative $0.05 in the same quarter last year. This print easily cleared analysts' estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Fortrea's full-year EPS of $0.41 to grow 27.3%.
We were impressed by how significantly Fortrea blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates by a wide margin. Zooming out, we think this quarter featured some important positives. Still, news of the CEO stepping down dominated, and shares traded down 2.4% to $6.01 immediately after reporting.
Is Fortrea an attractive investment opportunity right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it's free.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Yahoo

an hour ago

• Yahoo

AeroVironment (AVAV) Reports Earnings Tomorrow: What To Expect

Aerospace and defense company AeroVironment (NASDAQ:AVAV) will be announcing earnings results this Tuesday afternoon. Here's what investors should know. AeroVironment missed analysts' revenue expectations by 10.9% last quarter, reporting revenues of $167.6 million, down 10.2% year on year. It was a disappointing quarter for the company, with full-year revenue guidance missing analysts' expectations significantly and full-year EBITDA guidance missing analysts' expectations significantly. Is AeroVironment a buy or sell going into earnings? Read our full analysis here, it's free. This quarter, analysts are expecting AeroVironment's revenue to grow 23.7% year on year to $243.7 million, improving from the 5.9% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $1.41 per share. Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. AeroVironment has only missed Wall Street's revenue estimates once over the last two years, exceeding top-line expectations by 5.6% on average. Looking at AeroVironment's peers in the aerospace and defense segment, some have already reported their Q1 results, giving us a hint as to what we can expect. HEICO delivered year-on-year revenue growth of 14.9%, beating analysts' expectations by 3.5%, and Redwire reported a revenue decline of 30.1%, falling short of estimates by 16.5%. HEICO traded up 7.4% following the results while Redwire's stock price was unchanged. Read our full analysis of HEICO's results here and Redwire's results here. Investors in the aerospace and defense segment have had steady hands going into earnings, with share prices flat over the last month. AeroVironment is up 7.2% during the same time and is heading into earnings with an average analyst price target of $195.38 (compared to the current share price of $190.94). Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we've identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.

The Hill

4 hours ago

• The Hill

Oil rises and US stock futures slip as markets react to US strike on Iran nuclear sites

NEW YORK (AP) — The price of oil rose and U.S. stock futures fell as global markets react to the U.S. strike against nuclear targets in Iran. The price of Brent crude oil, the international standard, rose 2.6% to $79 a barrel. U.S. crude rose 2.6% to $75.76 a barrel. On Saturday, U.S. forces attacked three Iranian nuclear and military sites, further increasing the stakes in the war between Israel and Iran. Futures for the S&P 500 and the Dow Jones Industrial Average slipped 0.3%, while Nasdaq futures fell 0.5%. Treasury yields were little changed. The modest moves indicate markets are taking the latest development in stride. The conflict, which began with an Israeli attack against Iran on June 13, has sent oil prices yo-yoing, which has in turn caused see-saw moves for the U.S. stock market, because of rising and ebbing fears that the war could disrupt the global flow of crude. Iran is a major producer of oil and also sits on the narrow Strait of Hormuz, through which much of the world's crude passes. An Iran retaliation that included closing off the waterway would be technically difficult to pull off but traders are afraid Iran could severely disrupt transit through it, sending insurance rates spiking and making shippers nervous to move without U.S. Navy escorts Some analysts think Iran is unlikely to close down the waterway because the country uses it to transport its own crude, mostly to China, and oil is a major source of revenue for the regime. 'It's a scorched earth possibility, a Sherman-burning-Atlanta move,' said Tom Kloza, chief market analyst at Turner Mason & Co. 'It's not probable.' Kloza thinks oil futures will ease back down after initial fears blow over. Ed Yardeni, a long-time analyst, agreed, writing in a report that Tehran leaders would likely hold back. 'They aren't crazy,' he wrote in a note to investors Sunday. 'The price of oil should fall and stock markets around the world should climb higher.' Other experts aren't so sure. Andy Lipow, a Houston analyst covering oil markets for 45 years, said countries are not always rational actors and that he wouldn't be surprised if Tehran lashed out for political or emotional reasons. 'If the Strait of Hormuz was completely shut down, oil prices would rise to $120 to $130 a barrel,' said Lipow, predicting that that would translate to about $4.50 a gallon at the pump and hurt consumers in other ways. 'It would mean higher prices for all those goods transported by truck, and it would be more difficult for the Fed to lower interest rates.'

Business Insider

5 hours ago

• Business Insider

Stifel Nicolaus Sticks to Their Buy Rating for Alkermes (ALKS)

In a report released today, Paul Matteis from Stifel Nicolaus maintained a Buy rating on Alkermes (ALKS – Research Report), with a price target of $42.00. The company's shares closed last Friday at $29.09. Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter According to TipRanks, Matteis is a 3-star analyst with an average return of 1.2% and a 41.20% success rate. Matteis covers the Healthcare sector, focusing on stocks such as Alkermes, Neurocrine, and uniQure. In addition to Stifel Nicolaus, Alkermes also received a Buy from UBS's Ashwani Verma in a report issued on June 17. However, on June 10, RBC Capital maintained a Hold rating on Alkermes (NASDAQ: ALKS).