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Why Is PRA Health Sciences (PRAH) Down 9.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for PRA Health Sciences (PRAH - Free Report) . Shares have lost about 9.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PRA Health Sciences due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

PRA Health Q2 Earnings and Revenues Beat Estimates

PRA Health Sciences, Inc reported second-quarter 2020 earnings per share of 86 cents, beating the Zacks Consensus Estimate of 82 cents by 4.9%. The bottom line fell from the prior-year quarter tally by 29.5%.

The company registered revenues of $729.9 million in the quarter under review, down 4.4% year over year and 3.8% at cc. The figure surpassed the Zacks Consensus Estimate of $718 million by 1.7%.

Results in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $701.6 million.  Through the segment, the company receives contracts to provide clinical research services, with payments based on fixed-fee or fee-for-service arrangements.

Revenues at the Clinical Research segment amounted to $667.3 million, down 4.9% year over year while revenues at the Data Solutions segment amounted to $62.6 million, up 2.5% year over year.

Direct Costs

Direct costs totaled $395.3 million in the quarter, up 2.4% fromthe prior-year quarter. Per management, the increase was primarily driven by a rise in labor-related costs at the Clinical Research and higher data costs inData Solutions segments.

Margin Trend              

Gross profit came in at $334.6 million, down 11.2%.

Gross margin came in at 45.8%, highlighting a contraction of 356 basis points (bps).

Adjusted operating profit in the quarter grossed $224.6 million, down 19.3% from the year-ago quarter. Adjusted operating margin in the quarter was 30.8%, down 569 bps.

Financial Update

The company exited the second quarter of 2020 with cash and cash equivalents of$168.2 million, up from $150.8 million at the end of the first quarter.

Cumulative net cash provided by operating activities in the second quarter totaled $86.5 million against net cash used of $4.8 million in the year-ago period.

2020 Guidance

For 2020, PRA Health expects revenues within $3.07-$3.13 billion. The Zacks Consensus Estimate for the same stands at $3.06 billion.

Adjusted earnings for 2020 is expected within $4.35-$4.55. The Zacks Consensus Estimate for the same stands at $4.40.

For the third quarter of 2020, the company’s total revenues are estimated between $754 million and $784 million.The Zacks Consensus Estimate for the same stands at $752.6 million.

Adjusted earnings for the third quarter is projected between $1.09 and $1.19.The Zacks Consensus Estimate for the same stands at $1.10.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, PRA Health Sciences has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, PRA Health Sciences has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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