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PRA Health (PRAH) Stock Down 2.8% Despite Q4 Earnings Beat

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PRA Health Sciences, Inc. (PRAH - Free Report) declines 2.8% on Feb 24, despite reporting strong earnings.

The company reported fourth-quarter 2020 adjusted EPS of $1.55, beating the Zacks Consensus Estimate by 5.4%. The bottom line, also, rose from the prior-year quarter’s tally by 0.6%.

For 2020, adjusted EPS came in at $4.75, falling 8.1% year over year.

Revenues

For the quarter, revenues came in at $873.5 million, beating the Zacks Consensus Estimate by 5.4%. The topline grew 9.1% year over year.

For 2020, the company recorded revenues of $3.18 billion in the quarter under review, up 3.8% year over year and 3.7% at cc.

Results in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $872.4 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 $797.5 million, up 10% year over year, while revenues at the Data Solutions segment amounted to $75.9 million, up 1.1% year over year.

Direct Costs

Direct costs totaled $437.7 million in the quarter, up 13.4% from the prior-year quarter. Per management, the increase was primarily driven by a rise in labor-related costs in the Clinical Research segment and higher data costs in the Data Solutions segment.

 

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

 

Margin Trend

Gross profit came in at $435.7 million, up 5.2%. Gross margin came in at 49.9%, highlighting a contraction of 187 basis points (bps).

Adjusted operating profit in the quarter grossed $315 million, up 1.4% from the year-ago quarter. Adjusted operating margin in the quarter was 36.1%, down 275 bps.

Financial Update

The company exited the fourth quarter of 2020 with cash and cash equivalents of $506.3 million, up from $236.2 million at the end of the year-ago period.

Cumulative net cash provided by operating activities totaled $427.2 million compared with $253.6 million in the year-ago period.

Our Take

PRA Health ended the fourth quarter on a strong note. Solid performance by both 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 CRO 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 #5 (Strong Sell).

Some better-ranked stocks in the broader medical space that already announced quarterly results are Hologic, Inc. (HOLX - Free Report) , Abbott Laboratories (ABT - Free Report) and AngioDynamics, Inc. (ANGO - Free Report) , each presently carrying a Zacks Rank#2 (Buy). You can see the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.

Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, which surpassed the Zacks Consensus Estimate by 33.6%.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Further, fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%.

AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny. The Zacks Consensus Estimate was pegged at a loss of two centsper share. Additionally, revenues of $72.8 million beat the consensus mark by 8%.

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