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Forterra Inc. (NASDAQ:FRTA) Pops After Plunge

Forterra Inc. (NASDAQ:FRTA)

Forterra Inc. (NASDAQ:FRTA) Pops After Plunge

The rebound of Forterra Inc. (NASDAQ:FRTA) shares continued in Tuesday’s trading session after a breathtaking 52% collapse on disappointing second quarter financial results. The stock was up by 9.69% in Tuesday’s trading session to end the day at $4.64 a share.

Forterra Inc. (NASDAQ:FRTA)
One month FRTA stock price chart

Class Action Lawsuits

Forterra Inc (NASDAQ:FRTA) continues to trade in a strong down-trend after gapping lower on their Q2 earning’s miss. The stock is currently trading in a $3.85 – $5.25 trading range.

In addition to coming under selling pressure, Forterra is the subject of a wave of class-action lawsuits over claims its officers might have breached their fiduciary duties. Law firms are investigating the company’s executives over claims they may have provided inaccurate statements and omitted material facts ahead of the company’s IPO on October 19, 2016.

The lawsuits allege, among other things, that the IPO registration failed to disclose that Forterra Inc (NASDAQ:FRTA)’s Drainage and Water segments organic sales, had dropped significantly. Shareholders have also taken the company to task for failing to confirm it was under immense pricing pressure in the steel pipe business.

Disappointing Q3 Outlook

The claims come after Forterra Inc (NASDAQ:FRTA) reported a net income of $11.2 million for the second quarter compared to a net income of $36.7 million reported last year. Net sales in the quarter increased to $436.7 million compared to $381.7 million reported in the prior year quarter.

“Our financial results this quarter were lower than we expected, reflecting the impact of weather, unanticipated competitive pricing pressure in certain areas and higher costs of goods sold. We continue to aggressively pursue price increases and growth of higher margin products,” said Forterra Inc (NASDAQ:FRTA) CEO, Jeff Bradley.

The clearest indication that Forterra Inc (NASDAQ:FRTA) is not yet out of the woods, even after considering the weather impact on its financial reports, is the fact that it issued a lower Q3 guidance. The company says it expects its EBITDA earnings to be in the range of $50 – $60 million which is well below consensus estimates of $89 million.

According to the Chief Executive Officer, earnings will take a hit in the second half of the year due to increased costs of operation. The remarks have only gone to fuel concerns that the company strategy that sought to grow margins and earnings is no longer working.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

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