A month has gone by since the last earnings report for PRA Group (PRAA - Free Report) . Shares have lost about 12.7% 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’s Q3 Earnings Miss, Down Y/Y
PRA Group’s third-quarter 2018 earnings per share of 22 cents missed the Zacks Consensus Estimate of 35 cents by 37.1%. Moreover, the bottom line declined 35.2% year over year. This was primarily due to the company’s major investments in the United States during the quarter under review. The company made the second highest quarterly investment of worth $170.4 million in Americas Core portfolios.
Its total revenues were $225 million, up 10.3% from the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate by 0.9% on the back of higher finance receivables of the company.
It witnessed global cash collection of $389.3 million, which rose 2% compared with 2017's third quarter, driven by collections from U.S. call center and U.S. legal collections. However, this was partially offset by a decline in Global Insolvency cash collections as well as other Americas Core cash.
Quarterly Operational Update
PRA Group’s fee income of $2.5 million decreased 4.1% year over year.
The company’s finance receivables during the reported period grew 11% year over year, primarily because of yield increases on certain pools in Americas Core and Europe Core along with Americas Core portfolio investment in 2017 and 2018.
Total operating expenses increased 18.2% year over year to $173.5 million. This deterioration was due to higher legal collection costs, more compensation and employee services, attributable to certain expansions of the company.
In the quarter under review, the company reported cash collections of $389 million, up nearly 2% from the prior-year quarter, aided by Americas Core. However, the same was partially offset by lower Global Insolvency cash collections and Americas Core cash collections.
As of Sep 30, 2018, the company has total assets of $3.6 billion, down 1.1% from the year-end 2017.
PRA Group exited the quarter with total equity of $1.1 billion, up 0.9% from the level on Dec 31, 2017.
Cash and cash equivalents in the quarter under discussion were $114 million, down 5.3% from the year-end 2017.
In the quarter under consideration, borrowings inched up 1.1% to $2.19 billion.
The company invested $237.5 million in new finance receivables in the third quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted -21.24% due to these changes.
Currently, PRA Group has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, PRA Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.