As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the drug development inputs & services industry, including Fortrea (NASDAQ:FTRE) and its peers.
Companies specializing in drug development inputs and services play a crucial role in the pharmaceutical and biotechnology value chain. Essential support for drug discovery, preclinical testing, and manufacturing means stable demand, as pharmaceutical companies often outsource non-core functions with medium to long-term contracts. However, the business model faces high capital requirements, customer concentration, and vulnerability to shifts in biopharma R&D budgets or regulatory frameworks. Looking ahead, the industry will likely enjoy tailwinds such as increasing investment in biologics, cell and gene therapies, and advancements in precision medicine, which drive demand for sophisticated tools and services. There is a growing trend of outsourcing in drug development for nimbleness and cost efficiency, which benefits the industry. On the flip side, potential headwinds include pricing pressures as efforts to contain healthcare costs are always top of mind. An evolving regulatory backdrop could also slow innovation or client activity.
The 8 drug development inputs & services stocks we track reported a very strong Q1. As a group, revenues beat analysts’ consensus estimates by 4%.
Thankfully, share prices of the companies have been resilient as they are up 8.4% on average since the latest earnings results.
Fortrea (NASDAQ:FTRE)
Spun off from Labcorp in 2023 to focus exclusively on clinical research services, Fortrea (NASDAQ:FTRE) is a contract research organization that helps pharmaceutical, biotech, and medical device companies develop and bring their products to market through clinical trials and support services.
Fortrea reported revenues of $651.3 million, down 1.6% year on year. This print exceeded analysts’ expectations by 7.1%. Overall, it was an exceptional quarter for the company with an impressive beat of analysts’ EPS estimates and full-year EBITDA guidance beating analysts’ expectations.
“Fortrea’s first quarter performance represents a solid start to 2025,” said Tom Pike, Chairman and CEO of Fortrea.
Fortrea scored the biggest analyst estimates beat but had the weakest full-year guidance update of the whole group. Investor expectations, however, were likely higher than Wall Street’s published projections, leaving some wishing for even better results (analysts’ consensus estimates are those published by big banks and advisory firms, not the investors who make buy and sell decisions). The stock is down 1.5% since reporting and currently trades at $6.07.
Is now the time to buy Fortrea? Access our full analysis of the earnings results here, it’s free.
Best Q1: UFP Technologies (NASDAQ:UFPT)
With expertise dating back to 1963 in specialized materials and precision manufacturing, UFP Technologies (NASDAQ:UFPT) designs and manufactures custom solutions for medical devices, sterile packaging, and other highly engineered products for healthcare and industrial applications.
UFP Technologies reported revenues of $148.1 million, up 41.1% year on year, outperforming analysts’ expectations by 5.9%. The business had an incredible quarter with an impressive beat of analysts’ EPS estimates.
UFP Technologies scored the fastest revenue growth among its peers. The market seems happy with the results as the stock is up 20.5% since reporting. It currently trades at $237.54.
Is now the time to buy UFP Technologies? Access our full analysis of the earnings results here, it’s free.
Azenta (NASDAQ:AZTA)
Serving as the guardian of some of medicine's most valuable materials, Azenta (NASDAQ:AZTA) provides biological sample management, storage, and genomic services that help pharmaceutical and biotechnology companies preserve and analyze critical research materials.
Azenta reported revenues of $143.4 million, up 5.2% year on year, exceeding analysts’ expectations by 2%. Still, it was a slower quarter as it posted a significant miss of analysts’ EPS estimates.
Interestingly, the stock is up 20.7% since the results and currently trades at $30.69.
Read our full analysis of Azenta’s results here.
Charles River Laboratories (NYSE:CRL)
Named after the Massachusetts river where it was founded in 1947, Charles River Laboratories (NYSE:CRL) provides non-clinical drug development services, research models, and manufacturing support to pharmaceutical and biotechnology companies.
Charles River Laboratories reported revenues of $984.2 million, down 2.7% year on year. This print surpassed analysts’ expectations by 4.6%. It was an exceptional quarter as it also logged a solid beat of analysts’ organic revenue estimates and an impressive beat of analysts’ full-year EPS guidance estimates.
Charles River Laboratories had the slowest revenue growth among its peers. The stock is up 31% since reporting and currently trades at $151.03.
Read our full, actionable report on Charles River Laboratories here, it’s free.
Medpace (NASDAQ:MEDP)
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ:MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Medpace reported revenues of $558.6 million, up 9.3% year on year. This number beat analysts’ expectations by 6%. Overall, it was an exceptional quarter as it also produced a solid beat of analysts’ organic revenue and EPS estimates.
The stock is up 4.4% since reporting and currently trades at $300.98.
Read our full, actionable report on Medpace here, it’s free.
Market Update
Thanks to the Fed’s rate hikes in 2022 and 2023, inflation has been on a steady path downward, easing back toward that 2% sweet spot. Fortunately (miraculously to some), all this tightening didn’t send the economy tumbling into a recession, so here we are, cautiously celebrating a soft landing. The cherry on top? Recent rate cuts (half a point in September 2024, a quarter in November) have propped up markets, especially after Trump’s November win lit a fire under major indices and sent them to all-time highs. However, there’s still plenty to ponder — tariffs, corporate tax cuts, and what 2025 might hold for the economy.
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