Fortrea Earnings: Healthy Backlog Supports Growth; Divestiture Improves Financial Flexibility

Fortrea reported year-end results, highlighted by total revenue exceeding $3.1 billion. We think Fortrea’s results are solid, especially given the challenges the company has faced in the year since its spinoff from LabCorp was announced as some customers became more hesitant to book new business due to uncertainty surrounding the spinoff. Management also announced the planned divestiture of its Patient Access and Endpoint Capital businesses to Arsenal Capital Partners for $345 million. Fortrea plans to use the majority of the proceeds to pay down its $1.6 billion in gross debt. Management’s goal of the divestiture is to allow Fortrea to sharpen its focus as a pure-play contract research organization and improve its financial flexibility. The divestiture is expected to close in the second quarter of 2024.