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PRA Health Sciences (PRAH) Up 1.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for PRA Health Sciences (PRAH - Free Report) . Shares have added about 1.2% 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 Health Sciences 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 Health's Q4 Earnings Top, Direct Costs Down

PRA Health 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%.

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.

Adjusted EPS for 2019 is expected between $4.93 and $5.08, representing growth of 15% to 19% from 2018.

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%.

Adjusted EPS for the first quarter is projected between 74 cents and 79 cents.

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted 7.77% due to these changes.

VGM Scores

Currently, PRA Health Sciences has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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. Notably, PRA Health Sciences has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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