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PRA Health's (PRAH) Q4 Earnings Top, Revenues Lag Estimates

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PRA Health Sciences, Inc. (PRAH - Free Report) posted fourth-quarter 2018 adjusted earnings per share (EPS) of $1.31, which surpassed the Zacks Consensus Estimate of $1.27. EPS rose 26% from the prior-year quarter’s tally.

PRA Health registered revenues of $729.6 million in the fourth quarter, up 11.2% year over year. However, the figure missed the Zacks Consensus Estimate by 2.8%.

The stock has a Zacks Rank #2 (Buy).

2018 at a Glance

PRA Health’s 2018 revenues totaled $2.87 billion, which fell short of the Zacks Consensus Estimate of $2.89 billion. Revenues shot up 27.1% from 2017.

2018 adjusted EPS was $4.28 which beat the Zacks Consensus Estimate of $4.25. Adjusted EPS rose 28.5% from 2017.

The company is managed through two reportable segments — the Clinical Research and the Data Solutions. For 2018, Clinical Research revenues totaled $2.62 billion (91.3% of net sales) and Data Solutions revenues were $249.5 million (8.7% of net sales).

PRA Health Sciences, Inc. Price, Consensus and EPS Surprise

 

PRA Health Sciences, Inc. Price, Consensus and EPS Surprise | PRA Health Sciences, Inc. Quote

Q4 in Detail

Segmental Analysis

Net new business in the Clinical Research segment came in at $667.3 million in the fourth 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 $74 million in the quarter under review. The company provides weekly, monthly or quarterly data reports and analytics to customers.

Direct Costs

Direct costs totaled $365.7 million in the quarter, down 0.9% year over year. Per management, the drop in direct costs was due to a favorable impact of $8.6 million from foreign currency exchange rate fluctuations.

In the Clinical Research segment, there was an increase in salaries and related benefits of $3.6 million in the fourth quarter.

The Data Solutions segment saw an increase of $1.6 million in direct costs.

Margin Trend

Gross profit, after excluding direct costs, came in at $363.9 million, up 26.8% from the prior-year quarter's figure. Gross margin, as a percentage of revenues, came in at 49.9%, up 610 basis points (bps) year over year.

Net income from operations, after excluding selling, general and administrative expenses from gross profit, came in at $96.8 million, up significantly from the year-ago quarter's $3.6 million.

Guidance

For 2019, PRA Health expects to achieve total revenues between $3.09 billion and $3.20 billion, representing reported and constant currency growth of 8% to 11%, respectively. The mid-point of $3.14 billion of the guided range lies below the Zacks Consensus Estimate of $3.19 billion.

Adjusted EPS for 2019 is expected between $4.93 and $5.08, representing growth of 15% to 19% from 2018. The mid-point of $5 of the guided range lies above the Zacks Consensus Estimate of $4.95.

For the first quarter of 2019, PRA Health expects revenues between $720 million and $740 million, reflecting reported growth of 3% to 5% and constant currency growth of 4% to 7%. The mid-point of $730 million of the guided range lies below the Zacks Consensus Estimate of $762.8 million.

Adjusted EPS for the first quarter is projected between 74 cents and 79 cents. The guided range lies below the Zacks Consensus Estimate of $1.07.

Our Take

PRA Health ended the fourth quarter on a mixed note. A solid EPS view for 2019 instils optimism. Strong performance by the Clinical Research segment is a positive. PRA Health continues to gain from large pharmaceutical companies, which contributed substantially to its top line in recent times. Management is optimistic about the integration of Symphony Health. With this buyout, PRA Health expects to enhance ability in the field of data and analytics. The company also rides high on CRO market prospects. Direct costs also contracted in the quarter. Expansion in gross margin is also a positive. Currency movements also seemed favorable in the quarter.

Q4 Earnings of Other MedTech Majors at a Glance

Other top-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems (VAR - Free Report) , AngioDynamics (ANGO - Free Report) and CONMED Corporation (CNMD - Free Report) .

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2.

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million exceeded the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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