Fortrea’s third quarter results were met with a significant positive response from the market, as robust demand across its clinical pharmacology and clinical development businesses drove revenue growth. Management highlighted that win rates with biotech clients doubled compared to the prior quarter, and strong RFP volumes led to new business wins in both new and repeat clients. CEO Anshul Thakral credited operational improvements, noting, “Our win rates improved significantly, reaching the highest level in six quarters,” and emphasized the company’s ability to accelerate site selection and trial enrollment through technology and workflow enhancements.
Is now the time to buy FTRE? Find out in our full research report (it’s free for active Edge members).
Fortrea (FTRE) Q3 CY2025 Highlights:
- Revenue: $701.3 million vs analyst estimates of $648.3 million (3.9% year-on-year growth, 8.2% beat)
- Adjusted EPS: $0.12 vs analyst expectations of $0.16 (22.8% miss)
- Adjusted EBITDA: $50.7 million vs analyst estimates of $49.49 million (7.2% margin, 2.5% beat)
- The company lifted its revenue guidance for the full year to $2.73 billion at the midpoint from $2.65 billion, a 2.8% increase
- EBITDA guidance for the full year is $185 million at the midpoint, in line with analyst expectations
- Operating Margin: -1.2%, up from -2.7% in the same quarter last year
- Market Capitalization: $1.09 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are 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.
Our Top 5 Analyst Questions From Fortrea’s Q3 Earnings Call
- Eric Coldwell (Baird) questioned the shift from pre-spin to post-spin contract awards and how Fortrea is optimizing legacy contracts. CEO Anshul Thakral explained efforts to rightsize contracts and focus on independent deals with improved operational discipline.
- Brendan (Citi, for Patrick Donnelly) asked about trends in bookings between large pharma and biotech, as well as the impact of industry tariffs. Thakral described neutral to favorable trends in both segments and noted that biopharma clients remain resilient despite external pressures.
- David Windley (Jefferies) sought clarity on pricing strategy and the mix of direct fees versus pass-throughs. CFO Jill McConnell explained that higher pass-throughs, rather than service fees, drove much of the revenue upside, which limited margin expansion.
- Luke Sergott (Barclays) pressed on whether there are structural barriers to achieving industry-standard margins. Thakral stated there are no such barriers, but margin improvement will require consistent backlog growth and continued cost discipline.
- Jenny Cao (Truist, for Jailendra Singh) inquired about the newly launched FSP sales team and traction in that segment. Thakral reported early momentum in RFPs but emphasized a cautious approach to ensure only profitable contracts are pursued.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) the pace of new business wins and backlog growth, particularly in biotech and clinical pharmacology, (2) the impact of ongoing SG&A and headcount reduction initiatives on margin expansion, and (3) adoption rates and measurable productivity gains from new technology tools. Progress in these areas will signal how effectively Fortrea is executing its transformation strategy.
Fortrea currently trades at $11.90, up from $9.70 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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