PRA Health Sciences, Inc. PRAH is well poised for growth on the back of strong international expansion, growing Contact Research Organization (CRO) industry and favorable biopharmaceutical industry dynamics. However, the tough capital spending environment remains a concern.
The stock currently carries a Zacks Rank #3 (Hold).
Shares of PRA Health Sciences have gained 4.4%, compared with the industry’s growth of 2.3% on a year-to-date basis. However, the stock fell short of the S&P 500 Index’s rally of 14%.
What’s Deterring the Stock?
The general capital spending environment remains a woe for PRA Health. The company’s cautious view comes on the back of few factors like the international trade dispute that has been affecting the financial markets in recent times. This in turn can put pressure on capital equipment expenditure, consequently lengthen the decision process leading to purchases.
Factors to Boost PRA Health
On the back of worldwide increase in demand for outsourced clinical development solutions, the CRO industry has been gaining traction that has put it under the limelight. Going by a CRO Market Size Projections report by Industry Standard Research (ISR), the size of the worldwide CRO market was approximately $32 billion in 2016 and will witness a 7% CAGR to $44 billion in 2021.
International expansion has been and continues to be a major growth driver. This is because PRA Health is one of the largest CROs in the world by revenues, focusing on executing clinical trials on a global basis.
We note that, PRA Health’s revenues from international operations is growing fast (currently Europe, Africa, and Asia-Pacific region contributes more than 30% of the company’s total revenue).
The company continues to gain from large pharmaceutical companies, which contributed to the top line in recent times.
Moreover, a solid 2019 outlook instills optimism in the stock. For 2019, PRA Health anticipates 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.
Which Way Are Estimates Headed?
For 2019, the Zacks Consensus Estimate for revenues is pegged at $3.10 billion, indicating an improvement of 11.1% from the year-ago period. For adjusted earnings per share, the same is pinned at $5.03, suggesting growth of 17.5% year-ago reported figure.
Some better-ranked stocks from the broader medical space are Cardiovascular Systems, Inc. CSII, Oxford Immunotec Global PLC OXFD and Haemonetics Corporation HAE, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardiovascular Systems has earnings growth rate for fiscal fourth quarter of 2019 of 33.3%.
Oxford Immunotec has a long-term earnings growth rate of 25%.
Haemonetics has a long-term earnings growth rate 13.5%.
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