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PRA Health (PRAH) Q2 Earnings Beat, EPS Guidance Narrowed

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PRA Health Sciences, Inc. (PRAH - Free Report) reported second-quarter 2019 adjusted earnings per share (EPS) of $1.22, which outpaced the Zacks Consensus Estimate of $1.20. The bottom line rose 22% from the prior-year quarter’s tally.

The Zacks Rank #3 (Hold) registered revenues of $763.3 million in the quarter under review, up 5.6% year over year and 6.8% on a constant currency (cc) basis. However, the figure missed the Zacks Consensus Estimate by 0.1%.

Q2 in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $670.7 million in the second 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 at the Clinical Research segment and Data Solutions segment amounted to $702.2 million and $61.1 million, respectively, in the quarter under review. The company provides weekly, monthly or quarterly data reports and analytics to customers.

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

 

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

PRA Health Sciences, Inc. price-consensus-eps-surprise-chart | PRA Health Sciences, Inc. Quote

Direct Costs

Direct costs totaled $386.2 million in the quarter, up 1.2% year over year. Per management, the increase in direct costs was primarily driven by an increase in labor-related costs in the Clinical Research segment.

Margin Trend

Operating profit in the quarter was $88 million, up 19.3% from the year-ago quarter. Operating margin in the quarter was 11.5%, down significantly from the year-ago quarter’s 19.3%.

Financial Update

Cash and cash equivalents came in at $141.9 million, down 1.6% from the 2018-end level.

Guidance

For 2019, PRA Health expects revenues within $3.02 billion-$3.10 billion, representing reported growth of 5-8% and 6-8% at cc. Notably, this is lower than the earlier provided range of $3.09-$3.20 billion, representing reported and cc growth of 8-11%, respectively. The Zacks Consensus Estimate of $3.05 billion is within the guided range.

Adjusted EPS is expected between $4.98 and $5.08, calling for year-over-year growth of 16-19%. Notably, the view has been narrowed from the previously-communicated range of $4.93 to $5.08. The mid-point of $5.03 is in line with the Zacks Consensus Estimate.

Our Take

PRA Health ended the second 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 is also poised well on CRO market prospects.

On the flip side, direct costs shot up in the quarter under review. A slashed revenue guidance for 2019 also raises concern.

Earnings of Other MedTech Majors at a Glance

Some better-ranked companies, which posted solid results this earnings season, are Stryker Corporation (SYK - Free Report) , Baxter International Inc. (BAX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .

Stryker delivered second-quarter 2019 adjusted EPS of $1.98, beating the Zacks Consensus Estimate by 2.6%. Its revenues of $3.65 billion surpassed the Zacks Consensus Estimate by 1.4%. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Baxter delivered second-quarter 2019 adjusted EPS of 89 cents, which surpassed the Zacks Consensus Estimate of 81 cents by 9.9%. Its revenues of $2.84 billion outpaced the consensus estimate of $2.79 billion by 1.9%. The company currently has a Zacks Rank #2.

Intuitive Surgical reported second-quarter 2019 adjusted EPS of $3.25, which beat the Zacks Consensus Estimate of $2.85. Its revenues of $1.1 billion surpassed the Zacks Consensus Estimate of $1.03 billion. The company sports a Zacks Rank #1 at present.

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