Fortrea Earnings: Strong Headwinds as a Newly Stand-Alone Company; Positive Long-Term Outlook

Fortrea continues to face issues as a newly stand-alone company, and management lowered its 2024 guidance after second-quarter revenue fell more than expected and one-time costs contributed to a net loss of $138 million during the quarter. These headwinds are stronger than anticipated, and we have lowered Fortrea's fair value estimate to $27.20 per share from $35.50. Investors reacted negatively to Fortrea's quarterly results, and the stock plummeted 20%. We view shares as trading at a 26% discount to our fair value estimate, representing an opportunity for long-term investors with a high degree of risk tolerance as management works to right-size the business.