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A month has gone by since the last earnings report for PRA Group (PRAA). Shares have added about 16.6% 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 its most recent earnings report in order to get a better handle on the important catalysts.
PRA Group's Q3 Earnings Beat Estimates, Improve Y/Y
PRA Group’s third-quarter 2020 earnings per share of 92 cents beat the Zacks Consensus Estimate of 64 cents by 43.8%. Moreover, the bottom line skyrocketed 67.3% year over year, primarily owing to an improved top line. However, the same was offset to some extent by the COVID-19 led pandemic.
Meanwhile, revenues of $268 million were up 7.2% from the year-ago quarter, courtesy of portfolio income. Further, the top line surpassed the Zacks Consensus Estimate by 5.5%.
The company’s cash collection of $519.3 million climbed 15% from the year-ago figure on the back of higher contributions from Americas Core and Europe Core. Cash collections in the quarter were solid in the United States.
Quarterly Operational Update
PRA Group’s fee income of $2 million dropped 17.3% year over year. The company’s portfolio income came in at $240.3 million in the quarter under review compared with income recognized from finance receivables of $247.5 million in the prior-year quarter.
Total operating expenses dipped 1.1% over year to $179.2 million, mainly owing to lower legal collection fees. Moreover, a decline in compensation and employee benefits as a result of trimmed U.S. call center staff also contributed to this upside.
The company spent $177.6 million on finance receivables in the quarter under review.
Financial Update (As of Sep 30, 2020)
The company had total assets worth $4.2 billion, down 5.1% from the level at 2019 end. PRA Group exited the quarter with total equity of $1.2 billion, up 3.7% from the level on Dec 31, 2019.
Cash and cash equivalents in the quarter under discussion were $92.8 million, down 22.5% from the level at 2019 end. At the end of the third quarter, borrowings decreased 10.1% to $2.5 billion from the number at 2019 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
Currently, PRA Group has a strong Growth Score of A, a grade with the same score on the momentum front. However, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. It's no surprise PRA Group has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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