10-Q · May 5, 2026
Fortrea Holdings (FTRE) reported Q1 2026 results with revenues of $636.5 million, marking a slight decline of 2.3% year-over-year, while earnings per share (EPS) improved to $0.16, significantly exceeding expectations.…
Earnings analysis · 10-Q
FTRE earnings analysis
Filed July 29, 2026 · Our reading of the company's report
The latest report
Fortrea’s Q2 showed a meaningful earnings and margin recovery: revenue of $678.2 million was still 4.5% below last year, but gross margin improved 170 bps to 20.5% and operating margin returned to roughly 2.2%. The GAAP…
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Fortrea’s Q2 showed a meaningful earnings and margin recovery: revenue of $678.2 million was still 4.5% below last year, but gross margin improved 170 bps to 20.5% and operating margin returned to roughly 2.2%. The GAAP loss narrowed to $0.14 per share from $4.14 a year earlier, principally because the prior period carried a $309.1 million impairment, while cost actions reduced SG&A and restructuring costs. Liquidity appears adequate, with $168.6 million of cash and $447.7 million of unused revolver capacity, although organic revenue and FSP demand remain key execution risks.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Reported figures
- Earnings per share
- $-0.14
What stood out
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Revenue rose sequentially despite YoY decline
Q2 revenue was $678.2 million, down 4.5% year over year from $710.3 million, but increased 6.5% sequentially from $636.5 million in Q1 2026. The year-over-year decline reflected a 4.9% organic-revenue decline, partly offset by 0.4% favorable FX.
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Gross margin expanded 170 bps YoY
Gross margin expanded to 20.5% from 18.8% in Q2 2025 and 19.4% in Q1 2026. Direct costs declined 6.6% to $539.0 million, faster than the 4.5% revenue decline, helped by lower pass-through, stock-based compensation and personnel costs.
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Operations returned to positive profitability
Operating income was approximately $14.8 million, or a 2.2% operating margin, versus an approximately $323.6 million operating loss in Q2 2025, which included $309.1 million of goodwill and other asset impairments. SG&A fell 18.2% to $102.1 million and restructuring charges fell 73.8% to $2.7 million.
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GAAP EPS loss narrowed materially
GAAP diluted EPS improved to a loss of $0.14 from a $4.14 loss in Q2 2025 and a $0.25 loss in Q1 2026. The year-over-year improvement was aided by the absence of the prior-year $309.1 million impairment charge.
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Operating cash flow inflected positive
First-half operating cash flow turned positive at $11.9 million, an improvement of $114.3 million from $102.4 million used in the prior-year period. Capital spending was $17.0 million, or 1.3% of first-half revenue of $1.315 billion.
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Cash and revolver capacity support liquidity
Liquidity improved: cash was $168.6 million at June 30, 2026, while the revolver had no outstanding balance and $447.7 million of availability. The receivables facility was extended to February 23, 2029, with $300.0 million of receivables sold as of quarter-end.
What to watch
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Organic revenue and FSP demand declined
Revenue remained under pressure, declining 4.5% year over year to $678.2 million as organic revenue fell 4.9%; management cited lower pass-through costs and lower Functional Service Provider demand.
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GAAP loss and tax drag persisted
The company remained GAAP unprofitable, reporting a $0.14 diluted loss per share and $12.0 million of income-tax expense despite approximately $14.8 million of operating income. Management cited valuation allowance effects tied primarily to expected interest-deductibility limitations.
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Variable-rate debt creates interest sensitivity
Debt and rate exposure remain meaningful: variable-rate debt outstanding was $572.0 million, and a hypothetical 1% increase in rates would increase interest expense by $5.7 million. Total interest expense was $19.3 million in Q2.
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Backlog conversion is not assured
Backlog was $7.8 billion at June 30, 2026, but contracts generally permit early termination with 30-to-90-day notice periods; management cautions it does not generally have a contractual right to the full award amount in backlog.
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No new material risk-factor disclosures
No material risk-factor changes were reported versus the December 31, 2025 Form 10-K. The filing explicitly states there were no material changes to previously disclosed risk factors.
Management's outlook
The 10-Q contains no quantitative revenue or EPS outlook; management states that existing cash, operating cash flow and credit facilities are expected to fund current and planned operations for at least the next 12 months.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.