Pomerantz Law Firm Announces the Filing of a Class Action Against Fortrea Holdings, Inc. and Certain Officers – FTRE
NEW YORK, June 06, 2025 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against Fortrea Holdings, Inc. (“Fortrea” or the “Company”) (NASDAQ: FTRE) and certain officers. The class action, filed in the United States District Court for the Southern District of New York, and docketed under 25-cv-04630, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Fortrea securities between July 3, 2023 and February 28, 2025 both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against the Company and certain of its top officials.
If you are an investor who purchased or otherwise acquired Fortrea securities during the Class Period, you have until August 1, 2025 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Danielle Peyton at newaction@pomlaw.com or 646-581-9980 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
Fortrea is a global contract research organization (“CRO”) that provides biopharmaceutical product and medical device development solutions to pharmaceutical, biotechnology, and medical device customers. The Company claims to have the “scale and expertise to advise, design and deliver [its] customers’ programs, projects and programs globally” and, “[w]ith a portfolio of projects that extend over multiple years,” its longer-term contract durations purportedly “give [Fortrea] confidence and visibility into [its] future revenues.”
Fortrea was formerly the clinical development and commercialization services business of Labcorp Holdings Inc. (“Labcorp”), a life sciences and healthcare company. In June 2023, Labcorp spun off Fortrea as a standalone, publicly traded company (the “Spin-Off” or the “Spin”). At the time of the Spin-Off, certain of the long-term projects in Fortrea’s portfolio remained ongoing (the “Pre-Spin Projects”).
In describing the purported benefits of the Spin-Off, the Company has stated that “Fortrea has been established to bring sharpened focus to our purpose, which is partnering with customers to bring life-changing therapies to patients faster” and, “as an independent company with increased operational agility and financial flexibility, [it is] the ideal size to deliver on this purpose. With [its] global scale, access to clinical data-driven insights, site relationships and decades of experience, Fortrea is able to bring customers tailored solutions as a trusted partner.”
In connection with the Spin-Off, Labcorp and Fortrea entered into several transition services agreements (the “TSAs”), pursuant to which Fortrea pays Labcorp to provide certain transitional services for a set period, including information technology (“IT”) applications, network and security support and hosting, as well as finance, human resources, marketing, and other administrative support. However, since completing the Spin-Off, Fortrea has consistently represented that it has “built detailed TSA exit plans” designed to save costs and improve margins by investing in developing its own infrastructure.
In March 2024, the Company announced that it was targeting 2025 adjusted EBITDA margins—a measure of a company’s operating profit as a percentage of its revenue—on a full-year basis of approximately 13%. In August 2024, the Company slightly lowered its targeted adjusted 2025 EBITDA margins to the “11% to 12% range,” but touted that this would still “represent a roughly 300 basis points improvement at the midpoint versus 2024, and broadly a 30% to 40% increase in adjusted EBITDA dollars delivered.”
The complaint alleges that, throughout the Class Period, Defendants made materially false and misleading statements regarding the Company’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Fortrea overestimated the amount of revenue the Pre-Spin Projects were likely to contribute to the Company’s 2025 earnings; (ii) Fortrea overstated the cost savings it would likely achieve by exiting the TSAs; (iii) as a result, the Company’s previously announced EBITDA targets for 2025 were inflated; (iv) accordingly, the viability of the Company’s post-Spin-Off business model, as well as its business and/or financial prospects, were overstated; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times.
On September 25, 2024, the investment bank Jefferies published a report (the “Jefferies Report”) downgrading Fortrea from buy to hold. Among other things, the Jefferies Report cited perceived weaknesses in the Company’s business model as a CRO amid pressure on biotechnology funding and suggested that the cost savings Fortrea expects to achieve by exiting the TSAs are “[n]ot as [m]aterial as [o]ne [m]ight [t]hink,” stating that “IT infrastructure costs to exit the TSAs are already non-GAAPed out of adjusted EBITDA. Thus, once TSAs are exited, [Fortrea] will just be replacing TSA costs with internal operating costs.”
On this news, Fortrea’s stock price fell $2.73 per share, or 12.29%, to close at $19.48 per share on September 25, 2024.
Then, on December 6, 2024, market analyst Baird Equity Research (“Baird”) downgraded Fortrea to neutral from outperform after the Company abruptly cancelled two scheduled conferences. A Baird analyst said that “[g]iven our ongoing concerns around the sector, [Fortrea’s] choppy history post spin, and lack of clarity on the abrupt communications course change, we cannot recommend an actionable investment (buy or sell)[.]”
On this news, Fortrea’s stock price fell $1.90 per share, or 8.06%, to close at $21.67 per share on December 6, 2024.
Finally, on March 3, 2025, Fortrea announced its fourth quarter and full year 2024 financial results, disclosing that its “targeted revenue and adjusted EBITDA trajectories for 2025 [were] not in line with [its] prior expectations.” Specifically, in an earnings call held that same day, Fortrea revealed that the Company’s Pre-Spin projects are “late in their life cycle [and] have less revenue and less profitability than expected for 2025” and that “post-spin work is not coming on fast enough to offset the pre-spin contract economics.” The Company also said this “older versus newer mix issue will continue to negatively impact [Fortrea’s] financial performance during 2025.”
On this news, Fortrea’s stock price fell $3.47 per share, or 25.05%, to close at $10.38 per share on March 3, 2025.
After the end of the Class Period, on March 17, 2025, the credit rating agency Fitch Ratings downgraded Fortrea and projected the Company’s 2025 EBITDA margin to be in the range of “7.0% to 8.0% in 2025,” a significant decline from the Company’s previously targeted 2025 EBITDA margin figures of 13%, as projected March 2024, and 11%-12%, as projected in August 2024.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered billions of dollars in damages awards on behalf of class members. See www.pomlaw.com.
Attorney advertising. Prior results do not guarantee similar outcomes.
CONTACT:
Danielle Peyton
Pomerantz LLP
dpeyton@pomlaw.com
646-581-9980 ext. 7980
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