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PRA Health (PRAH) Q3 Earnings and Revenues Beat Estimates

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PRA Health Sciences, Inc. (PRAH - Free Report) reported third-quarter 2019 adjusted earnings per share (EPS) of $1.32, which outpaced the Zacks Consensus Estimate of $1.30. The bottom line rose 16.8% from the prior-year quarter tally.

The Zacks Rank #2 (Buy) company registered revenues of $780.7 million in the quarter under review, up 8.8% year over year and 9.7% on a constant currency (cc) basis. Also, the figure surpassed the Zacks Consensus Estimate by 1.1%.

Q3 in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $669.4 million in the third 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.

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

Revenues at the Clinical Research segment and Data Solutions segment amounted to $719 million and $61.7 million, respectively, in the quarter under review. The company provides weekly, monthly or quarterly data reports and analytics to customers.

Direct Costs

Direct costs totaled $389.3 million in the quarter, up 4.8% 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 $95.8 million, up significantly from the year-ago quarter’s figure of $38.8 million. Operating margin in the quarter was 12.3%, down significantly from the year-ago quarter’s 22.6%.

Financial Update

Cash and cash equivalents came in at $181.7 million, up 26% from the 2018-end level.

Guidance

For 2019, PRA Health expects revenues within $3.02-$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 $3.06 billion is within the guided range.

Adjusted EPS is expected between $5.07 and $5.12, calling for year-over-year growth of 18-20%, higher than the earlier projected range of $4.98 and $5.08, mirroring year-over-year growth of 16-19%. The Zacks Consensus Estimate of $5.07 is at the low end of the guided range.

Our Take

PRA Health ended the third quarter on a mixed note. A raised EPS view and retained guidance for 2019 instills 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. Contraction in operating margin is also worrisome.

Earnings of Other MedTech Majors at a Glance

Other top-ranked companies, which posted solid results this earnings season, are Edwards Lifesciences (EW - Free Report) , Thermo Fisher Scientific Inc. (TMO - Free Report) and ResMed Inc. (RMD - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted EPS of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%.

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which surpassed the consensus estimate by 2.1%. Revenues of $6.27 billion outpaced the consensus estimate by 1.3%.

ResMed reported fiscal first-quarter 2020 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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