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PRA Group (PRAA) Incurs Q1 Loss Due to Lower Portfolio Income
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PRA Group, Inc. (PRAA - Free Report) incurred a first-quarter 2023 loss of $1.50 per share against the Zacks Consensus Estimate of earnings of 45 cents per share. Notably, earnings of 97 cents per share were reported in the prior-year quarter.
Total revenues dropped 35.4% year over year to $155.5 million. Also, the top line missed the consensus mark by 30.2%.
The quarterly results were hurt by an elevated expense level, weaker portfolio income and softer-than-expected U.S. tax season. Nevertheless, the upside was partly offset by a favorable supply environment that led to strong portfolio acquisition volumes.
PRA Group’s cash collection amounted to $411.3 million, which fell 14.5% year over year in the quarter under review. The metric suffered a blow due to a reduced portfolio purchase level that led to a 30.2% year-over-year decline in U.S. call centers and other collections. The reported figure fell short of the Zacks Consensus Estimate of $431 million but outpaced our estimate of $405.7 million.
The portfolio income tumbled 9.3% year over year to $188.2 million, lower than the Zacks Consensus Estimate of $190 million but higher than our estimate of $179.9 million. Other revenues of $4.1 million climbed 31.1% year over year in the first quarter and beat the Zacks Consensus Estimate of $3.7 million as well as our estimate of $3.6 million.
Total operating expenses escalated 12.1% year over year to $189.1 million in the first quarter due to a 15.9% increase in compensation and employee services, a 44.6% surge in legal collection costs and a 28.7% increase in outside fees and services.
PRAA incurred a net loss of $53.9 million against the prior-year quarter’s net income of $34.6 million.
It purchased nonperforming loan portfolios of $230.2 million in the quarter under review, which surged 56% year over year. The cash efficiency ratio of 54.3% deteriorated 1,080 basis points year over year due to higher legal collection expenses.
The estimated remaining collections (“ERC”) of PRA Group totaled $5,674.7 million at the first-quarter end.
Financial Update (as of Mar 31, 2023)
PRAA exited the first quarter with cash and cash equivalents of $116.5 million, which surged 39.7% from the 2022-end level. It had $1.6 billion remaining under its credit facilities at the first-quarter end.
Total assets of $4,543.6 million increased 8.8% from the figure at 2022 end.
Borrowings totaled $2,937.9 million, up 17.8% from the figure as of Dec 31, 2022.
Total equity of $1,224.7 million decreased 4.8% from the 2022-end level.
Business Outlook
Legal collection expenses are anticipated to stay in the low-$20 million range during the second quarter of 2023. The same is likely to reach the mid-$20 million range in each quarter by 2023-end.
Net interest expense is projected to be in the mid-$40 million range in the second quarter of 2023.
By the fourth quarter of 2023, the cash efficiency ratio is estimated to be 60% on a quarterly run rate basis.
Management forecasts to collect an ERC balance of $1.4 billion within the next 12 months.
Of the other Finance sector players that have reported first-quarter results so far, the bottom-line results of The Goldman Sachs Group, Inc. (GS - Free Report) , U.S. Bancorp (USB - Free Report) and Morgan Stanley (MS - Free Report) beat the respective Zacks Consensus Estimate.
Goldman Sachs reported first-quarter 2023 earnings per share of $8.79, which surpassed the Zacks Consensus Estimate of earnings of $8.14 per share. The bottom line fell significantly from $10.76 per share in the year-earlier quarter. Our estimate for earnings was $7.70 per share. Net earnings of $3.23 billion declined 18% from the prior-year quarter.
Net revenues of $12.22 billion fell 5% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $13.03 billion. The Asset & Wealth Management division of GS generated revenues of $3.22 billion in the reported quarter, up 24% year over year.
U.S. Bancorp’s first-quarter 2023 earnings per share (excluding merger and integration-related charges) of $1.16 handily beat the Zacks Consensus Estimate of earnings per share of $1.13. It grew 17.2% from the prior-year quarter. Net income (GAAP basis) was $1.7 billion, up 9.4% from the prior-year quarter.
Total net revenues in the quarter were $7.14 billion, up 28.2% year over year. The top line surpassed the Zacks Consensus Estimate of $7.13 billion. USB’s non-interest income rose 4.6% year over year to $2.5 billion. Average total loans improved 7.4% sequentially to $386.7 billion.
Morgan Stanley reported first-quarter 2023 earnings of $1.70 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.67 per share. The bottom line, however, reflects a decline of 16% from the year-ago quarter. Quarterly net revenues were $14.52 billion, down 2% from the prior-year quarter.
The top line beat the Zacks Consensus Estimate of $13.91 billion. Our estimate for revenues was $13.47 billion. Equity underwriting fees of MS decreased 22% from the prior-year quarter and fixed-income underwriting declined 6%. Fixed-income trading revenues decreased 12% and equity trading income declined 14%.
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PRA Group (PRAA) Incurs Q1 Loss Due to Lower Portfolio Income
PRA Group, Inc. (PRAA - Free Report) incurred a first-quarter 2023 loss of $1.50 per share against the Zacks Consensus Estimate of earnings of 45 cents per share. Notably, earnings of 97 cents per share were reported in the prior-year quarter.
Total revenues dropped 35.4% year over year to $155.5 million. Also, the top line missed the consensus mark by 30.2%.
The quarterly results were hurt by an elevated expense level, weaker portfolio income and softer-than-expected U.S. tax season. Nevertheless, the upside was partly offset by a favorable supply environment that led to strong portfolio acquisition volumes.
PRA Group, Inc. Price, Consensus and EPS Surprise
PRA Group, Inc. price-consensus-eps-surprise-chart | PRA Group, Inc. Quote
Quarterly Operational Update
PRA Group’s cash collection amounted to $411.3 million, which fell 14.5% year over year in the quarter under review. The metric suffered a blow due to a reduced portfolio purchase level that led to a 30.2% year-over-year decline in U.S. call centers and other collections. The reported figure fell short of the Zacks Consensus Estimate of $431 million but outpaced our estimate of $405.7 million.
The portfolio income tumbled 9.3% year over year to $188.2 million, lower than the Zacks Consensus Estimate of $190 million but higher than our estimate of $179.9 million. Other revenues of $4.1 million climbed 31.1% year over year in the first quarter and beat the Zacks Consensus Estimate of $3.7 million as well as our estimate of $3.6 million.
Total operating expenses escalated 12.1% year over year to $189.1 million in the first quarter due to a 15.9% increase in compensation and employee services, a 44.6% surge in legal collection costs and a 28.7% increase in outside fees and services.
PRAA incurred a net loss of $53.9 million against the prior-year quarter’s net income of $34.6 million.
It purchased nonperforming loan portfolios of $230.2 million in the quarter under review, which surged 56% year over year. The cash efficiency ratio of 54.3% deteriorated 1,080 basis points year over year due to higher legal collection expenses.
The estimated remaining collections (“ERC”) of PRA Group totaled $5,674.7 million at the first-quarter end.
Financial Update (as of Mar 31, 2023)
PRAA exited the first quarter with cash and cash equivalents of $116.5 million, which surged 39.7% from the 2022-end level. It had $1.6 billion remaining under its credit facilities at the first-quarter end.
Total assets of $4,543.6 million increased 8.8% from the figure at 2022 end.
Borrowings totaled $2,937.9 million, up 17.8% from the figure as of Dec 31, 2022.
Total equity of $1,224.7 million decreased 4.8% from the 2022-end level.
Business Outlook
Legal collection expenses are anticipated to stay in the low-$20 million range during the second quarter of 2023. The same is likely to reach the mid-$20 million range in each quarter by 2023-end.
Net interest expense is projected to be in the mid-$40 million range in the second quarter of 2023.
By the fourth quarter of 2023, the cash efficiency ratio is estimated to be 60% on a quarterly run rate basis.
Management forecasts to collect an ERC balance of $1.4 billion within the next 12 months.
Zacks Rank
PRA Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Finance Sector Releases
Of the other Finance sector players that have reported first-quarter results so far, the bottom-line results of The Goldman Sachs Group, Inc. (GS - Free Report) , U.S. Bancorp (USB - Free Report) and Morgan Stanley (MS - Free Report) beat the respective Zacks Consensus Estimate.
Goldman Sachs reported first-quarter 2023 earnings per share of $8.79, which surpassed the Zacks Consensus Estimate of earnings of $8.14 per share. The bottom line fell significantly from $10.76 per share in the year-earlier quarter. Our estimate for earnings was $7.70 per share. Net earnings of $3.23 billion declined 18% from the prior-year quarter.
Net revenues of $12.22 billion fell 5% from the year-ago quarter. The top line missed the Zacks Consensus Estimate of $13.03 billion. The Asset & Wealth Management division of GS generated revenues of $3.22 billion in the reported quarter, up 24% year over year.
U.S. Bancorp’s first-quarter 2023 earnings per share (excluding merger and integration-related charges) of $1.16 handily beat the Zacks Consensus Estimate of earnings per share of $1.13. It grew 17.2% from the prior-year quarter. Net income (GAAP basis) was $1.7 billion, up 9.4% from the prior-year quarter.
Total net revenues in the quarter were $7.14 billion, up 28.2% year over year. The top line surpassed the Zacks Consensus Estimate of $7.13 billion. USB’s non-interest income rose 4.6% year over year to $2.5 billion. Average total loans improved 7.4% sequentially to $386.7 billion.
Morgan Stanley reported first-quarter 2023 earnings of $1.70 per share, which surpassed the Zacks Consensus Estimate of earnings of $1.67 per share. The bottom line, however, reflects a decline of 16% from the year-ago quarter. Quarterly net revenues were $14.52 billion, down 2% from the prior-year quarter.
The top line beat the Zacks Consensus Estimate of $13.91 billion. Our estimate for revenues was $13.47 billion. Equity underwriting fees of MS decreased 22% from the prior-year quarter and fixed-income underwriting declined 6%. Fixed-income trading revenues decreased 12% and equity trading income declined 14%.