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PRA Group (PRAA) Incurs Q4 Loss, Declares Management Changes

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PRA Group Inc. (PRAA - Free Report) incurred an operating loss of 33 cents per share in fourth-quarter 2016. The Zacks Consensus Estimate was of an operating earnings of 68 cents per share. The company had reported operating earnings of $1.03 per share in the year-ago quarter. The deterioration mainly stemmed from a substantial decline in revenues.

Net loss of 38 cents per share in the reported quarter compared unfavorably with earnings of $1.83 per share in the year-ago quarter. This was primarily because of a charge of $62.5 million against certain pools of finance receivables.

Operational Update

PRA Group’s total revenue of $155.3 million decreased 33% year over year due to lower income from finance receivables. Reported revenues also missed the Zacks Consensus Estimate of $219.5 million.

Additionally, PRA Group’s revenues from finance receivables income plunged 37% to $132 million. Fee income was up 7.7% to $21.2 million, while other revenues increased 2.8% to $2.1 million. Cash collections in the fourth quarter were $348.8 million, down 6% year over year.

Total operating expenses decreased 6.8% year over year to $148.2 million. This was mainly due to lower, compensation and employee service expenses, outside fees and services and other operating expenses.

PRA Group invested $199.8 million in new finance receivables in the fourth quarter, down 12% year over year.

Financial Update

As of Dec 31, 2016, PRA Group had total assets worth $3.2 billion, up 5.7% from year-end 2015. The company exited the quarter with total equity of $917 million, up 9.2% from Dec 31, 2015.

As of Dec 31, 2016, cash and cash equivalents were $94.3 million, up 32% year over year. This was because borrowings increased 3.5% year over year to $1.78 billion.

Annualized return on average equity was a negative 7.9% compared with a return of 19.8% in the year-ago quarter.

Management Change

The company announced a management succession plan that is aimed to steer the company to profitability. Per the plan, Kevin Stevenson, the current president and chief administrative officer, will succeed Steve Fredrickson as the chief executive officer of the company. Stevenson will take office following the 2017 Annual Meeting of Stockholders, which will be held on Jun 1, 2017.

PRA Group, Inc. Price, Consensus and EPS Surprise

 

Zacks Rank and Stocks to Consider

PRA Group currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks include Financial Engines, Inc. , Houlihan Lokey, Inc. (HLI - Free Report) , Marathon Patent Group, Inc. (MARA - Free Report) . Each of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Financial Engines reported a positive earnings surprise in three out of the last four quarters with an average beat of 2.34%.

Houlihan Lokey posted a positive earnings surprise in three out of the last four quarters with an average beat of 4.87%.

Marathon Patent posted a positive earnings surprise in two out of the last four quarters with an average beat of 8.45%.

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