FTRE · Fortrea Holdings
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $25.88
Note written ·
Price against the kill line
21.9% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $25.88, on record since 11 November 2026. The shares are up 11.6% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $25.88, the 28 October 2026 closing high, which would show the shares leading the S&P 500 and prove this call wrong; so would fourth-quarter backlog above $7,316 million with book-to-bill above 1.12x.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Health Care
Quarter to 30 September 2026, filed 29 October 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 692
- Revenue, change on a year (%)
- −1.4
- Gross margin (%)
- 20.2
- Operating margin (%)
- 2.2
- Free cash flow, four quarters ($M)
- 169
- Net cash, cash less debt ($M)
- −835
- Enterprise value to sales (×)
- 1.0
- Enterprise value to operating income (×)
- 217.5
All filed numbers
What Fortrea Holdings reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 692 | −1.4 | 20.2 | 2.2 |
| first filed | 678 | −4.5 | 20.5 | 2.2 |
| first filed | 637 | −2.3 | 19.4 | −0.5 |
| first filed | 661 | −5.2 | 19.8 | −2.1 |
| first filed | 701 | +3.9 | 17.5 | −1.2 |
| first filed | 710 | +7.2 | 18.8 | −46.5 |
| Pre-tax income ($M) | −3.6 |
| Net income ($M) four quarters: −68.7 | 0.6 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +11.0 |
| Operating cash flow ($M) | 202 |
| Capital spending ($M) | 32.8 |
| Free cash flow ($M) | 169 |
| Cash and short-term investments ($M) | 221 |
| Debt ($M) non-current long-term debt plus current maturities | 1,055 |
| Net cash, cash less debt ($M) | −835 |
| Deferred revenue ($M) −14.3% on a year | 6.0 |
| Backlog, orders not yet delivered ($M) −3.5% on a year | 4,391 |
| Receivables ($M) | Not reported |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 532 |
| Market value ($M) | 1,949 |
| Enterprise value, market value plus net debt ($M) | 2,784 |
| Enterprise value to sales (×) | 1.0 |
| Enterprise value to operating income (×) | 217.5 |
| Price to earnings (×) | Not meaningful |
| Price to book value (×) | 3.7 |
| Free-cash-flow yield (%) | 8.7 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 8.0% of shares outstanding sold short, 4.1 days of average trading to cover, −38.9% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $146K |
| 12 monthsfrom | $0 | $4.7M |
The thesis
Fortrea's shares are more likely to lag the S&P 500 over the next three months. Margins are improving, but a $558 million backlog cut leaves 2027 revenue harder to see, and the shares have already fallen below their 50-day average after the report. Backlog growth from the restated $7,316 million at the fourth-quarter report settles the case. Management's 17 November 2026 conference appearance is the first chance to update the backlog picture.
The 29 October 2026 release supported the cost side of the case. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose to $58.0 million from $50.7 million a year earlier. The full-year adjusted EBITDA range moved up to $210–218 million. Backlog, however, fell to $7,316 million at 30 September 2026 after the company cut $558 million for scope and delivery estimates, including inactive trials. That compares with $7,800 million reported at 30 June 2026.
Brokers split after the report. Truist ($29), Evercore ISI ($28), Citigroup ($27) and Barclays ($26) raised targets on 30 October 2026, and TD Cowen raised to $26 on 2 November 2026. Mizuho went the other way on 11 November 2026, cutting the shares to Underperform with a $19 target. Investing.com reported Mizuho's view that Fortrea will capture less of any industry demand recovery than larger peers. The rating is Low because the backlog restatement, not the margin gain, sets 2027 revenue, and the price has fallen through the 50-day average since the report.
Bullish and bearish views on Fortrea Holdings Inc.
The bull case on Fortrea Holdings Inc. (FTRE), in brief: earnings beat and guidance rose. The bear case: backlog was restated lower.
Bull case
- Earnings beat and guidance rose. Third-quarter adjusted earnings per share were $0.28 against a $0.22 consensus estimate, and revenue was $691.5 million (Benzinga, 29 October 2026). Full-year revenue guidance moved to $2,665–2,690 million from $2,620–2,690 million.
- Margins kept improving. Adjusted EBITDA rose to $58.0 million in the quarter while revenue slipped to $691.5 million from $701.3 million a year earlier (29 October 2026 release).
- Orders still exceed revenue. Book-to-bill, meaning net new orders divided by revenue, was 1.12x in the third quarter and 1.12x over twelve months, up from 1.06x in the second quarter. The company said the backlog adjustment did not affect this ratio.
- Cash generation turned up. Free cash flow was $52.5 million in the third quarter, and cash reached $220.6 million at 30 September 2026 (29 October 2026 release).
- Most post-report targets sit above the price. Five firms raised targets to between $26 and $29 on 30 October 2026 and 2 November 2026. MarketBeat put the average target at $24.23 on 11 November 2026.
Bear case
- Backlog was restated lower. The $558 million cut took backlog to $7,316 million at 30 September 2026, against $7,800 million at 30 June 2026 and $7,846 million at 31 March 2026 (company releases). Backlog is the pool future revenue is drawn from.
- A broker turned negative on scale. Mizuho downgraded the shares to Underperform from Neutral on 11 November 2026 with a $19 target, citing limited room to close the gap with larger contract research organisations (Investing.com, 11 November 2026). The shares closed at $20.38 that day, down from $21.39 on 10 November 2026.
- The fourth quarter slows. Management said on the 29 October 2026 call that fourth-quarter revenue will slow sequentially on fewer working days, with higher information-technology spending (Benzinga transcript, 29 October 2026).
- Insiders sold into the summer recovery. Chief Operating Officer Mark Morais sold 4,892 shares at $18.19 on 19 August 2026 and 3,149 shares at $16.85 on 9 September 2026, each after an option exercise (SEC Form 4 filings).
- Leverage stays high. Long-term debt was $1,031.9 million plus a $23.4 million current portion at 30 September 2026 (29 October 2026 release). Term loan A matures 30 June 2028.
Price setup
The shares closed at $20.38 on 11 November 2026, 22.1% below the 52-week intraday high of $26.16 set on 28 October 2026. The highest close of that run was $25.88 on 28 October 2026. The last close sits under the 50-day moving average of $20.70 and above the 200-day moving average of $15.87.
The shares are up 14.4% over three months, from a $17.82 close on 13 August 2026. The rebound from the 52-week closing low of $8.87 on 30 March 2026 remains intact on the 200-day average. Since the report, the range has run from $22.24 (9 November 2026) down to $20.38 (11 November 2026).
The price already reflects a split view. At $20.38 on 11 November 2026, the shares trade below every post-report target except Mizuho's $19, so the market is discounting the brokers' margin-led recovery figures.
Catalysts ahead
- 17 November 2026: Fireside chat at the Jefferies Global Healthcare Conference, London, 8:30-8:55 AM EST, with the CEO and CFO. It is management's first public appearance after the backlog restatement and the Mizuho downgrade. Any update on fourth-quarter bookings, backlog or 2027 revenue would show there.
What would change the view
A daily close above $25.88, the 28 October 2026 closing high, which would show the shares leading the S&P 500 and prove this call wrong; so would fourth-quarter backlog above $7,316 million with book-to-bill above 1.12x.
What it trades with
Fortrea trades with contract research peers IQVIA and Medpace. All three depend on drug developers' clinical-trial spending. IQVIA reported research and development solutions bookings of $3.2 billion, a 1.2x book-to-bill, on 27 October 2026, and Medpace reported net new awards up 10.6% to $873.4 million on 21 October 2026. Fortrea's 1.12x trails IQVIA's figure, which is the scale gap Mizuho cited. Funding conditions for small biotech companies move the group together. With about $1.06 billion of debt at 30 September 2026, Fortrea's equity is more sensitive to interest rates and credit conditions than its less-indebted peers.
The evidence, claim by claim (8)
- Third-quarter revenue was $691.5M versus $701.3M a year earlier; adjusted EBITDA $58.0M versus $50.7M; adjusted EPS $0.28 versus a $0.22 consensus estimate. Fortrea Q3 2026 results release; Benzinga, 29 October 2026 · as of
- Backlog was $7,316M at 30 September 2026 after a $558M reduction for estimated scope and study delivery, including inactive trials; the company said guidance and book-to-bill were unaffected. Fortrea Q3 2026 results release · as of
- Third-quarter book-to-bill was 1.12x and the trailing-twelve-month ratio was 1.12x, versus 1.06x in the second quarter. Fortrea Q3 2026 results release · as of
- Full-year 2026 guidance moved to $2,665-2,690M revenue (from $2,620-2,690M) and $210-218M adjusted EBITDA (from $205-220M). Fortrea Q3 2026 results release · as of
- Third-quarter free cash flow was $52.5M; cash was $220.6M and long-term debt $1,031.9M plus a $23.4M current portion. Fortrea Q3 2026 results release · as of
- Mizuho downgraded Fortrea to Underperform from Neutral with a $19 target (from $16), citing scale disadvantages against larger peers. Investing.com and MarketBeat, 11 November 2026 · as of
- Post-report target raises: Truist $29, Evercore ISI $28, Citigroup $27 and Barclays $26 on 30 October 2026; TD Cowen $26 (Buy) on 2 November 2026. Benzinga analyst ratings, 30 October 2026 and 2 November 2026 · as of
- Fortrea closed its all-cash acquisition of the Early Phase Services division of Worldwide Clinical Trials, valued at about $45M. Fortrea press release, 19 October 2026 · as of
Sources
- Mizuho downgrades Fortrea stock rating on scale concerns · investing.com
- Fortrea (NASDAQ:FTRE) Downgraded by Mizuho to Underperform · marketbeat.com ·
- Fortrea to Participate in Jefferies Global Healthcare Conference · finviz.com
- Scroll Back to Top · fortrea.com
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