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PRA Health (PRAH) Gains 4.3% Following Q3 Earnings Beat

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PRA Health Sciences, Inc. (PRAH - Free Report) rallies 4.3% on Nov 5 after reporting strong earnings results.

The company reported third-quarter 2020 EPS of $1.30, beating the Zacks Consensus Estimate by 15%. The bottom line, however, fell from the prior-year quarter tally by 1.5%.

The company recorded revenues of $796.3 million in the quarter under review, up 2% year over year and 3.8% at cc. The figure surpassed the Zacks Consensus Estimate by 3.7%.

Results in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $737.9 million, indicating growth of 10.2% from the prior-year quarter. 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 $732.1 million, up 1.8% year over year while revenues at the Data Solutions segment amounted to $64.2 million, up 4.1% year over year.

Direct Costs

Direct costs totaled $412.1 million in the quarter, up 5.9% from the 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 in Data Solutions segments.

Margin Trend

Gross profit came in at $384.2 million, down 1.8%. Gross margin came in at 48.3%, highlighting a contraction of 188 basis points (bps).

Adjusted operating profit in the quarter grossed $268.8 million, down 9.1% from the year-ago quarter. Adjusted operating margin in the quarter was 33.8%, down 414 bps.

PRA Health Sciences, Inc. Price, Consensus and EPS Surprise

 

PRA Health Sciences, Inc. Price, Consensus and EPS Surprise

PRA Health Sciences, Inc. price-consensus-eps-surprise-chart | PRA Health Sciences, Inc. Quote

Financial Update

The company exited the third quarter of 2020 with cash and cash equivalents of $336.2 million, up from $168.2 million at the end of the second quarter.

Cumulative net cash provided by operating activities totaled $267.1 million compared with that of  $65.9 million in the year-ago period.

2020 Guidance

For 2020, PRA Health raised revenue projection to $3.12-$3.15 billion. The Zacks Consensus Estimate for the same stands at $3.10 billion.

Adjusted EPS for 2020 is expected within $4.61 and $4.71 (compared to previous range of $4.35-$4.55). The Zacks Consensus Estimate for the same stands at $4.43.

Our Take

PRA Health ended the third quarter on a strong note. Solid performance by both the Clinical Research and Data Solutions segments is a major positive. PRA Health continues to gain from large pharmaceutical companies and is also well-poised on Contract Research Organization market prospects.

On the flip side, direct costs shot up in the quarter under review. Contraction in both margins is a concern as well.

Zacks Rank and Key Picks

PRA Health currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Thermo Fisher Scientific Inc. (TMO - Free Report) , Align Technology, Inc. (ALGN - Free Report) and AngioDynamics, Inc. (ANGO - Free Report) , each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion surpassed the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, which surpassed the Zacks Consensus Estimate by 281.4%. Revenues of $734.1 million outpaced the consensus mark by 38%.

AngioDynamics reported first-quarter fiscal 2021 adjusted EPS of 2 cents against the Zacks Consensus Estimate of a loss per share of 6 cents. Revenues of $70.2 million beat the consensus mark by 6.9%.

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