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Why Is PRA Group (PRAA) Up 3% 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 added about 3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PRA Group 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 catalysts.

PRA Group's Q2 Earnings Beat Estimates, Surge Y/Y

PRA Group Inc.’s second-quarter 2018 earnings per share of 43 cents beat the Zacks Consensus Estimate of 42 cents. Moreover, the bottom line soared 72% from 25 cents in the year-ago quarter, majorly driven by higher cash collections, supply and focused operations in Europe.

The company’s reported net income plunged 54.4% year over year to 43 cents per share in the quarter under review.

PRA Group’s total revenues were $222 million, up 8.9% from the prior-year quarter’s level. The top line also surpassed the Zacks Consensus Estimate by 3.7%.

Quarterly Operational Update

PRA Group’s net finance receivable revenues of $219 million increased 12.9% over the year-earlier quarter’s figure owing to yield improvements in certain pools of Europe Core and Americas Core along with a record portfolio investment during 2017 in Americas Core and Americas Insolvency.

Fee income of $2.3 million surged 63% year over year.

Total operating expenses rose 7.3% year over year to $163.3 million. This downside was induced by higher compensation and employee services from increased U.S. collection staff.

In the reported quarter, the company generated cash collections of $406 million, up 8.5% from the amount recorded in comparable period last year. This upside was driven by a significant U.S. staffing and higher portfolio purchase in the Americas.

Financial Update

As of Jun 30, 2018, the company had total assets worth $3.5 billion, up 2.8% from the year-end 2017 tally.

PRA Group exited the second quarter with total equity of $1.1 billion, flat with the year-end 2017 level.

Cash and cash equivalents in the quarter under discussion were $71 million, down 41% from the figure at 2017 end.

In the second quarter, borrowings dipped 1.7% to $2.13 billion.

The company invested $221.4 million in new finance receivables in the quarter under review.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -30.45% 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.




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