Fitch alters Fortrea outlook to negative

Fitch Ratings said it changed the outlook for Fortrea Holdings Inc. to negative from stable. The agency also affirmed Fortrea’s long-term issuer default rating at BB and the senior secured credit facilities and senior secured notes at BB+/RR2.

“The negative outlook reflects Fortrea's year-to-date underperformance and Fitch's expectation of a slower-than-anticipated recovery in revenue and profitability levels. The affirmation reflects Fortrea's competitive position as a global contract research organization (CRO) that offers a broad range of clinical development solutions to biopharmaceutical and medical device customers, offset by uncertainties around margin expansion, macroeconomic conditions and volatility in biotech funding,” Fitch said in a press release.

The agency cited Fortrea's EBITDA margin retreat to 9.1% in 2Q23 from 14.5% in 2Q22 due mostly to higher pass-through revenues, reduced service fee revenues, and variation in cost recognitions (carve account methodology versus actual costs).

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