Intel stock extends gains after report of possible U.S. government stake
On Thursday, Truist Securities initiated coverage on Fortrea shares (NASDAQ:FTRE) with a Hold rating and a price target of $7.00. The firm’s analyst cited a combination of positive and challenging factors influencing the decision. Fortrea, known for its 30-year presence in the Contract Research Organization (CRO) sector, has experienced a mixed performance since becoming an independent entity after its spin-off. The company’s shares, currently trading at $6.07 with a market cap of $562 million, have declined over 83% in the past year. According to InvestingPro analysis, the stock appears slightly undervalued based on its Fair Value metrics.
The analyst acknowledged Fortrea’s advantageous position as a mid-sized CRO, noting its balanced client base of large pharmaceutical companies and biotech firms. While the company’s execution post-spin-off has been characterized as below average, InvestingPro data reveals that management has been actively buying back shares, and the company maintains a "GOOD" overall Financial Health score despite current challenges. Get access to 8 more exclusive InvestingPro Tips and comprehensive analysis through the Pro Research Report.
Recent industry-wide observations have shown a decline in market conditions for the CRO industry. Reports from Medpace (NASDAQ:MEDP), which maintains a Hold rating, indicated an increase in project cancellations and a dip in the quality of Request for Proposals (RFPs). Similarly, ICON Plc (NASDAQ:ICLR), which carries a Buy rating, pointed out a general sense of caution among clients, marked by cancellations and postponed decision-making affecting both major pharma and biotech companies.
Given these broader market trends and the specific challenges faced by Fortrea, Truist Securities expressed a preference for selective investment in CROs that do not bear the same level of individual risks. The firm’s position reflects a cautious approach to the sector, considering the current macro trends and the visibility for the CRO industry’s future.
In other recent news, Fortrea Holdings has been at the center of several significant developments impacting its financial outlook. Barclays (LON:BARC) analyst Luke Sergott downgraded Fortrea’s stock rating from Equalweight to Underweight and cut the price target from $12.00 to $6.00, citing challenges in the biotech sector that could hinder margin improvements. Similarly, Fitch Ratings downgraded Fortrea’s Long-Term Issuer Default Rating to ’B’ from ’BB-’, pointing to a weakening credit profile and reduced near-term growth prospects, with a negative outlook. TD Cowen also revised their price target for Fortrea to $11.00, maintaining a Hold rating, while noting the company’s efforts to enhance margins amid a revenue gap.
Meanwhile, Citi analysts reduced their price target for Fortrea from $23.00 to $12.00, maintaining a Neutral rating due to anticipated challenges in financial performance, including poor economics on pre-spin bookings. Despite these challenges, Fortrea is implementing cost-saving measures, particularly in Selling, General, and Administrative expenses, with expected net savings of $40-50 million annually. Additionally, Fortrea announced the appointment of Erin L. Russell as a Class II director, bringing extensive experience in finance and healthcare to the board. These recent developments reflect the company’s ongoing efforts to navigate a challenging operating environment while adjusting its strategic direction.
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