PRA Group (PRAA) Up 6.8% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for PRA Group, Inc. PRAA. Shares have added about 6.8% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is PRAA 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 Q4 Earnings Miss Estimates, Rise Y/Y
PRA Group’s fourth-quarter 2017 earnings per share of 36 cents missed the Zacks Consensus Estimate of 37 cents by 2.7%. The bottom line, however, rose 9% from 33 cents in the year-ago quarter on higher revenues.
The company reported net income of $1.92 per share in the fourth quarter against net loss of 38 cents in the prior-year quarter.
PRA Group’s total revenues were $205.7 million, up 32% year over year. The top line also surpassed the Zacks Consensus Estimate by 5.1%.
The company’s fourth-quarter results were impacted by net after-tax benefit of $73.2 million due to the Tax Cuts and Jobs Act, pre-tax expense of $1.7 million from the impairment of a legacy PRA Group Europe passive investment and after-tax expense of $2.0 million related to redeemable non-controlling interest in a Polish securitization fund.
Full-Year Updates
The company reported net income of $3.54 per share for 2017, up 93% year over year.
PRA Group’s total revenues came in at $813.6 million in 2017, down 2% year over year.
Quarterly Operational Update
PRA Group’s net finance receivable revenues of $198.2 million soared 50% over the year-ago quarter owing to an outsized allowance charge in the previous-year quarter. Net finance receivable revenues also increased on the back of significant portfolio investment and yield increases on certain pools.
Fee income of $6 million plunged 71% primarily due to the sale of two fee-based subsidiaries earlier in the year.
Total operating expenses inched up 1.5% year over year to $150.5 million. This downside was largely due to higher expenses related to compensation and employee services plus other operating expenses.
In the quarter under review, the company reported cash collections of $376.3 million, up 8% from the prior-year quarter.
Financial Update
As of Dec 31, 2017, PRA Group had total assets worth $3.7 billion, up 17% from year-end 2016.
The company exited the quarter with total equity of $1.1 billion, up 24% from Dec 31, 2016.
As of Dec 31, 2017, cash and cash equivalents were $120.5 million, up 28% from year-end 2016.
In the reported quarter, borrowings increased 22% to $2.2 billion.
The company invested $374.6 million in new finance receivables in the fourth quarter, up 87% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward IN the past month. There have been three revisions higher for the current quarter compared to one lower.
PRA Group, Inc. Price and Consensus
PRA Group, Inc. Price and Consensus | PRA Group, Inc. Quote
VGM Scores
At this time, PRAA has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stocks has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for momentum investors than value investors.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Interestingly, PRAA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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