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PRA Health's (PRAH) Q3 Earnings Top, Revenues Lag Estimates
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PRA Health Sciences, Inc. posted third-quarter 2018 adjusted earnings per share (EPS) of $1.13, which surpassed the Zacks Consensus Estimate of $1.08. EPS and rose 28.4% from the prior-year quarter’s tally. For investors’ notice, PRA Health Sciences witnessed an increase in direct costs this season, which included a favorable foreign currency effect of $6.1 million.
PRA Health registered revenues of $717.6 million in the third quarter, up 23.3% year over year. However, the figure missed the Zacks Consensus Estimate by 1.9%.
The stock has a Zacks Rank #2 (Buy).
Q3 in Detail
Segmental Analysis
The company is managed through two reportable segments — the Clinical Research and the Data Solutions.
Net new business in the Clinical Research segment came in at $657.2 million in the third quarter. Through this segment, the company receives contracts from customers to provide clinical research services with payments based on fixed-fee or fee-for-service arrangements.
Revenues in the Data Solutions segment amounted to $60.6 million in the quarter under review. The company provides weekly, monthly or quarterly data reports and analytics to customers.
Direct costs totaled $371.4 million in the quarter, 13.6% year over year.
In the Clinical Research segment, direct costs consist primarily of labor-related charges. Notably, labor-related costs rose $11.1 million in the segment.
In the Data Solutions segment, direct costs consist primarily of data costs. The segment witnessed $29.4 million of incremental direct costs year over year.
Margin Trend
Gross profit, after excluding direct costs, came in at $346.2 million, up 35.7% from the prior-year quarter's figure. Gross margin, as a percentage of revenues, came in at 48.2%, up 440 basis points (bps) year over year.
Net income from operations, after excluding selling, general and administrative expenses from gross profit, came in at $253.6 million, up 44.2% from the year-ago quarter's level. Adjusted operating margin, as a percentage of revenues, came in at 35.3%, up 510 bps.
Guidance
PRA Health reiterated 2018 revenue guidance in the range of $2.87-$2.92 billion, representing growth of 47%-50%. The Zacks Consensus Estimate is currently pegged at $2.91 billion, which is within the guidance.
Moreover, the company raised EPS view. Adjusted EPS is expected between $4.22 and $4.27 compared with the previous range of $4.13 and $4.23. The Zacks Consensus Estimate is currently pegged at $4.20, which is within the guidance.
Wrapping Up
PRA Health ended the third quarter on a mixed note, where in adjusted earnings beat the consensus mark, while revenues missed the same. A raised EPS view for 2018 instils optimism. Strong performance in the Clinical Research segment is a positive.
PRA Health continues to gain from large pharmaceutical companies, which contributed substantially to its top line growth in recent times. Management is optimistic about the integration of Symphony Health. With this buyout, PRA Health expects to enhance ability in the field of data and analytics. The company also rides high on CRO market prospects.
On the flip side, escalating direct costs are headwinds. For investors’ notice, management claims that the increase in direct costs was primarily related to a hike in labor-related costs, specifically in the Clinical Research segment.
Q3 Earnings of MedTech Majors at a Glance
A few other top-ranked stocks in the broader medical space, having reported solid earnings this season, are Stryker Corp. (SYK - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.
Stryker delivered third-quarter 2018 adjusted EPS of $1.69, which beat the Zacks Consensus Estimate of $1.68. Earnings improved 11.2% year over year, within the company’s guidance.
Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate of 42 cents. Adjusted earnings improved 46.9% from the year-ago quarter’s tally.
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PRA Health's (PRAH) Q3 Earnings Top, Revenues Lag Estimates
PRA Health Sciences, Inc. posted third-quarter 2018 adjusted earnings per share (EPS) of $1.13, which surpassed the Zacks Consensus Estimate of $1.08. EPS and rose 28.4% from the prior-year quarter’s tally. For investors’ notice, PRA Health Sciences witnessed an increase in direct costs this season, which included a favorable foreign currency effect of $6.1 million.
PRA Health registered revenues of $717.6 million in the third quarter, up 23.3% year over year. However, the figure missed the Zacks Consensus Estimate by 1.9%.
The stock has a Zacks Rank #2 (Buy).
Q3 in Detail
Segmental Analysis
The company is managed through two reportable segments — the Clinical Research and the Data Solutions.
Net new business in the Clinical Research segment came in at $657.2 million in the third quarter. Through this segment, the company receives contracts from customers to provide clinical research services with payments based on fixed-fee or fee-for-service arrangements.
Revenues in the Data Solutions segment amounted to $60.6 million in the quarter under review. The company provides weekly, monthly or quarterly data reports and analytics to customers.
PRA Health Sciences, Inc. Price and Consensus
PRA Health Sciences, Inc. Price and Consensus | PRA Health Sciences, Inc. Quote
Direct Costs
Direct costs totaled $371.4 million in the quarter, 13.6% year over year.
In the Clinical Research segment, direct costs consist primarily of labor-related charges. Notably, labor-related costs rose $11.1 million in the segment.
In the Data Solutions segment, direct costs consist primarily of data costs. The segment witnessed $29.4 million of incremental direct costs year over year.
Margin Trend
Gross profit, after excluding direct costs, came in at $346.2 million, up 35.7% from the prior-year quarter's figure. Gross margin, as a percentage of revenues, came in at 48.2%, up 440 basis points (bps) year over year.
Net income from operations, after excluding selling, general and administrative expenses from gross profit, came in at $253.6 million, up 44.2% from the year-ago quarter's level. Adjusted operating margin, as a percentage of revenues, came in at 35.3%, up 510 bps.
Guidance
PRA Health reiterated 2018 revenue guidance in the range of $2.87-$2.92 billion, representing growth of 47%-50%. The Zacks Consensus Estimate is currently pegged at $2.91 billion, which is within the guidance.
Moreover, the company raised EPS view. Adjusted EPS is expected between $4.22 and $4.27 compared with the previous range of $4.13 and $4.23. The Zacks Consensus Estimate is currently pegged at $4.20, which is within the guidance.
Wrapping Up
PRA Health ended the third quarter on a mixed note, where in adjusted earnings beat the consensus mark, while revenues missed the same. A raised EPS view for 2018 instils optimism. Strong performance in the Clinical Research segment is a positive.
PRA Health continues to gain from large pharmaceutical companies, which contributed substantially to its top line growth in recent times. Management is optimistic about the integration of Symphony Health. With this buyout, PRA Health expects to enhance ability in the field of data and analytics. The company also rides high on CRO market prospects.
On the flip side, escalating direct costs are headwinds. For investors’ notice, management claims that the increase in direct costs was primarily related to a hike in labor-related costs, specifically in the Clinical Research segment.
Q3 Earnings of MedTech Majors at a Glance
A few other top-ranked stocks in the broader medical space, having reported solid earnings this season, are Stryker Corp. (SYK - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
All the three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.
Stryker delivered third-quarter 2018 adjusted EPS of $1.69, which beat the Zacks Consensus Estimate of $1.68. Earnings improved 11.2% year over year, within the company’s guidance.
Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate of 42 cents. Adjusted earnings improved 46.9% from the year-ago quarter’s tally.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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