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PRA Group (PRAA) Up 11.6% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for PRA Group, Inc. (PRAA - Free Report) . Shares have added about 11.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is PRAA due for a pullback? 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's (PRAA - Free Report) Q1 Earnings and Revenues Beat Estimates

PRA Group’s first-quarter 2018 earnings per share of 47 cents beat the Zacks Consensus Estimate of 36 cents by 30.5%. Moreover, the bottom line rose 23.6% from 38 cents in the year-ago quarter on the back of higher revenues.

The company’s reported net income plunged 54.4% year over year to 47 cents per share in the quarter under review.

PRA Group’s total revenues were $223 million, up 8% from the prior-year quarter. The top line also surpassed the Zacks Consensus Estimate by 9.8%.

Quarterly Operational Update

PRA Group’s net finance receivable revenues of $217.7 million increased 12% over the year-earlier quarter owing to yield improvements on certain pools in Europe Core and Americas Core. This upside was also fueled by record portfolio purchases in the Americas last year.

Fee income of $5 million dropped 45.9%, primarily due to the sale of two fee-based subsidiaries earlier this year.

Total operating expenses increased 10.6% year over year to $169.5 million. This deterioration was induced by expenditure for compensation, employee services and communication.

In the reported quarter, the company generated cash collections of $426.6 million, up 12% from the comparable period last year. This upside was driven by operational improvements, hiring, high amounts of portfolio purchase, increase in ERC (Estimated Remaining Collections) and net finance receivable revenues. However, the cash collection was partially offset by a decline in Brazil’s cash collections as well as U.S. legal cash collections.

Financial Update

As of Mar 31, 2018, the company had total assets worth $3.7 billion, inching up 0.5% from the year-end 2017 tally.

PRA Group exited the first quarter with a total equity of $1.1 billion, up 3.3% from Dec 31, 2017-level.

Cash and cash equivalents in the quarter under discussion were $101.4 million, down 15.8% from the level at year-end 2017.

In the first quarter, borrowings dipped 0.9% to $2.15 billion.

The company invested $168.3 million in new finance receivables in the first quarter, up 26% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. There have been two revisions higher for the current quarter compared to three lower.

PRA Group, Inc. Price and Consensus

 

PRA Group, Inc. Price and Consensus | PRA Group, Inc. Quote

VGM Scores

At this time, PRAA has an average Growth Score of C, however its Momentum is doing a bit better with a B. The stock was also allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for value and momentum investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, PRAA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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