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PRA Group (PRAA) Up 12% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for PRA Group (PRAA). Shares have added about 12% 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 Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

PRA Group's Q2 Earnings Beat Estimates, Fall Y/Y

PRA Group’s second-quarter 2019 earnings per share of 41 cents beat the Zacks Consensus Estimate by 10.8%, mainly attributable to growth in revenues. However, the bottom line declined 4.7% year over year.

Meanwhile, its total revenues were $252 million, up 13.5% from the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate by 2.9% on the back of higher finance receivables of the company.

The company witnessed cash collection of $470.3 million, which rose 16% from the figure reported in second-quarter 2018 on the back of U.S. legal cash collections and U.S. call center plus other such collections.

Quarterly Operational Update

PRA Group’s fee income of $2.7 million increased 15.6% year over year.
The company’s finance receivables during the reported period grew 13.8% year over year to $249.2 million, primarily because of the Americas Core portfolio investment in 2018, certain purchases made in Europe Core and yield raises in Core.  

Total operating expenses increased 14.8% year over year to $187.5 million. This deterioration was due to higher legal collection costs and fees plus higher agency fees.

Business Update
The company spent $289.1 million on finance receivables in the quarter under review.  

Financial Update

As of Jun 30, 2019, the company had total assets of $4.1 billion, up 6.5% from the level at 2018 end.

PRA Group exited the quarter with total equity of $1.1 billion, up 2.4% from the level on Dec 31, 2018.

Cash and cash equivalents in the quarter under discussion were $105 million, up 6.9% from the year-end 2018.

In the quarter under consideration, borrowings increased 5.9% to $2.6 billion.
 

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months.

VGM Scores

At this time, PRA Group has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

PRA Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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