On Tuesday, Mizuho commenced coverage on Fortrea (NASDAQ:FTRE), a company recently spun from Covance, with a Neutral rating and a price target of $27.00. The firm pointed out that Fortrea is currently facing challenges with earnings visibility in the near term, attributed to market share losses following its separation from Covance.
The analysis by Mizuho suggested that due to the long-cycle nature of the Contract Research Organization (CRO) industry and the current industry conditions, Fortrea's path to recovery could extend to the 2025-2026 timeframe. The firm acknowledged that while the potential for margin expansion at Fortrea is an attractive narrative, the company's current leverage profile warrants a cautious approach.
Mizuho's stance is based on the need for concrete signs of Fortrea's operational success before considering a more positive outlook. The firm emphasized the importance of solid execution evidence as a precursor to any potential reassessment of their position on the stock.
The $27.00 price target set by Mizuho reflects the firm's neutral stance on Fortrea, indicating a wait-and-see approach as the company endeavors to navigate the post-spin-off landscape and strives to establish a stronger foothold in the CRO industry.
InvestingPro Insights
For investors considering Fortrea's potential, current InvestingPro data reveals a market capitalization of $2.28 billion, suggesting a moderate size within its industry. Despite recent challenges, net income is expected to grow this year, aligning with Mizuho's outlook for potential margin expansion in the future. This optimism may be tempered by the fact that Fortrea is not currently profitable, with a negative P/E ratio of -24.91 over the last twelve months as of Q1 2024.
Additionally, Fortrea's stock is trading near its 52-week low, which could indicate a buying opportunity as the Relative Strength Index (RSI) suggests the stock is in oversold territory. However, caution is advised as five analysts have revised their earnings estimates downwards for the upcoming period, reflecting concerns about the company's short-term earnings visibility. With these factors in mind, investors might find value in the comprehensive analysis available through InvestingPro, which includes PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 additional InvestingPro Tips available for Fortrea that could provide further insights into investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.