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PRA Health (PRAH) Up 0.2% in a Month Post Mixed Q1 Earnings

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Shares of PRA Health Sciences, Inc (PRAH - Free Report) have inched up 0.2% since the release of first-quarter 2018 results on Apr 25.

The upside can be attributed to better-than-expected earnings per share (EPS) in the first quarter. Over the past month, the stock has gained 4%, outperforming the industry’s rise of 3.2%.

Let’s delve into the major factors that lead to the uptick in shares.

Maintaining the streak of positive earnings surprises, the company posted adjusted EPS of 85 cents, which surpassed the Zacks Consensus Estimate by a penny. Earnings surged 41.7% from the prior-year quarter’s tally. Notably, the company had an unfavorable impact of $14 million from fluctuation in foreign currency exchange rates during the quarter.

PRA Health registered revenues of $701.8 million in the first quarter. In the reported quarter, the company adopted the new ASC 606 accounting standard for calculating revenues using the modified retrospective method.

Accordingly, the metric was $625.4 million. The Zacks Consensus Estimate for revenues was pegged at $695.7 million.

Revenues improved 15.2% at constant currency (cc) year over year.

 

Q1 in Detail

Segmental Analysis

The Company is managed through two reportable segments – the Clinical Research segment and the Data Solutions segment

The Clinical Research segment reported revenues of $645.1 million in the first quarter. Through this segment, the company receives contracts from customers to provide clinical research services with payments based on fixed-fee or fee-for-service arrangements.

Revenues in the Data Solutions segment amounted to $56.8 million in the first quarter. The company provides weekly, monthly or quarterly data reports and analytics to its customers.

Geographic Details

Total revenues from Americas came in at $485 million, which is 69.1% of net reported revenues.

Net revenues from Europe, Africa and Asia-Pacific came in at $216.8 million, which constitutes 30.9 % of net reported revenues.

Direct Costs

Direct costs were $381.4 million during the quarter, up 32.7% year over year. Total direct costs increased by $80 million year over year at cc.

For the Clinical Research segment, direct costs consist primarily of labor-related charges. Notably, labor-related costs increased $50.9 million in the segment.

In the Data Solutions segment, direct costs consist primarily of data costs. segment witnessed $40.6 million of incremental direct costs year over year.

Margin Trend

Gross profit in the reported quarter raked in $179.4 million, up 28.5% from the prior-year quarter’s tally. Gross margin came in at 25.6%, which contracted 300 basis points (bps).

Net income from operations increased 43.9% to 71.9 million.

PRA Health Sciences, Inc. Price and Consensus

 

Guidance

PRA Health reiterated its 2018 service revenue guidance in the range of $2.84-$2.95 billion. The Zacks Consensus Estimate is currently pegged at $2.79 billion, which lies below the guidance.

Adjusted earnings per diluted share are expected between $4 and $4.15 per share. The Zacks Consensus Estimate is currently pegged at $4.11, which is within the guidance.

Zacks Rank & Key Picks

PRA Health has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are Abiomed, Inc (ABMD - Free Report) , Genomic Health Inc (GHDX - Free Report) and Varian Medical Systems, Inc (VAR - Free Report) .

Abiomed has a long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genomic Health has an expected earnings growth rate of 187.5% and a Zacks Rank #1.

Varian Medical has a projected long-term earnings growth rate of 8%. The stock carries a Zacks Rank #2.

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