Activist hedge fund Starboard Value, headed by Jeffery Smith, has snapped up over 5% stake in contract research company Fortrea Holdings (NASDAQ:FTRE), the Wall Street Journal reported. Starboard’s stake is anticipated to be revealed in a Securities and Exchange Commission (SEC) filing on Tuesday. FTRE shares were down 4.6% in Monday’s extended trading session.
Starboard Buys a Stake in Fortrea
Fortrea started trading as an independent company in July after being spun off by Laboratory Corporation of America Holdings (NYSE:LH). It partners with biopharma, medical device, and diagnostic companies to provide clinical trial management, clinical pharmacology, and other services.
Starboard is positive about Fortrea’s prospects as a large and diversified contract research organization (CRO). It expects mid to high-single-digit growth for the CRO industry, driven by continued research and development spending by biotech companies. However, the activist investor thinks that Fortrea was not run efficiently under Laboratory Corporation and was burdened with additional costs following the spinoff.
Starboard intends to push the management for initiatives that would improve Fortrea’s margins. It is also suggesting other changes that would boost FTRE’s stock price. The company’s shares plunged in August as weak second-quarter results disappointed investors. Revenue was flat at $793 million on a year-over-year basis, while adjusted EPS declined to $0.52 from $0.97 in the prior-year quarter.
Starboard is known for pushing for strategic and governance changes at various companies to drive shareholder value. Most recently, the activist hedge fund acquired a stake in News Corp. (NASDAQ:NWSA) and is seeking various changes, including a spin-off of NWSA’s digital real estate division.
What is the Stock Price Forecast for Fortrea?
Fortrea shares have declined 7% over the past three months. Analysts’ average price target of $28.33 indicates possible downside of 5.9% from current levels. Wall Street has a Moderate Sell rating on FTRE stock based on two Holds and one Sell.