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Why Is PRA Group (PRAA) Down 8.6% Since Last Earnings Report?
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A month has gone by since the last earnings report for PRA Group (PRAA - Free Report) . Shares have lost about 8.6% 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 Group 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 drivers.
PRA Group Incurs Q1 Loss Due to Lower Portfolio Income
PRA Group 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.
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.
PRA Group 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)
PRA Group 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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -134.32% due to these changes.
VGM Scores
Currently, PRA Group has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise PRA Group has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
PRA Group belongs to the Zacks Financial - Miscellaneous Services industry. Another stock from the same industry, Moody's (MCO - Free Report) , has gained 8.1% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Moody's reported revenues of $1.47 billion in the last reported quarter, representing a year-over-year change of -3.4%. EPS of $2.99 for the same period compares with $2.89 a year ago.
Moody's is expected to post earnings of $2.16 per share for the current quarter, representing a year-over-year change of -2.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Moody's has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Why Is PRA Group (PRAA) Down 8.6% Since Last Earnings Report?
A month has gone by since the last earnings report for PRA Group (PRAA - Free Report) . Shares have lost about 8.6% 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 Group 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 drivers.
PRA Group Incurs Q1 Loss Due to Lower Portfolio Income
PRA Group 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.
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.
PRA Group 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)
PRA Group 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.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -134.32% due to these changes.
VGM Scores
Currently, PRA Group has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise PRA Group has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
PRA Group belongs to the Zacks Financial - Miscellaneous Services industry. Another stock from the same industry, Moody's (MCO - Free Report) , has gained 8.1% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.
Moody's reported revenues of $1.47 billion in the last reported quarter, representing a year-over-year change of -3.4%. EPS of $2.99 for the same period compares with $2.89 a year ago.
Moody's is expected to post earnings of $2.16 per share for the current quarter, representing a year-over-year change of -2.7%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Moody's has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.