PRA Group (PRAA) Down 6.8% Since Q1 Earnings Beat: Here's Why
Shares of PRA Group, Inc. PRAA have declined 6.8% since it reported first-quarter 2022 results on May 9, 2022. Even though PRAA reported better-than-expected earnings, supported by decreased operating expenses, investors might be worried about its lower portfolio and fee income. The positives were partially offset by reduced cash collections in the Americas and Australia Core.
Let’s delve deeper in first-quarter results.
PRA Group reported first-quarter 2022 earnings per share of 97 cents, beating the Zacks Consensus Estimate of 74 cents. However, the bottom line decreased from $1.27 per share a year ago.
Total revenues of $240.6 million were down from the year-ago quarter’s $289.5 million. Also, the top line missed the Zacks Consensus Estimate of $251 million.
PRA Group, Inc. Price, Consensus and EPS Surprise
PRA Group, Inc. price-consensus-eps-surprise-chart | PRA Group, Inc. Quote
Quarterly Operational Update
PRAA’s cash collection of $481 million decreased from the year-ago figure of $555.9 million due to a decrease in the Americas and Australia Core collections. U.S. call center and other collections declined 27% year over year in the first quarter. Similar traits were witnessed in the U.S. legal collections.
PRA Group’s fee income of $1.8 million decreased from $2.2 million a year ago. Its portfolio income came in at $207.5 million during the quarter under review, down from $231.7 million in the prior-year quarter.
Total operating expenses were down to $168.6 million from $178.7 million a year ago on lower compensation and employee services, legal collection costs and fees, and outside fees and services.
PRA Group purchased $147.5 million of nonperforming loan portfolios in the quarter under review. Its cash efficiency ratio declined to 65.1% in the first quarter, down from 68% in the year-ago period. Estimated remaining collections in the first quarter were $5.7 billion, majority of which were in the United States.
Share Repurchase Update
PRAA bought back shares worth $40 million in the first quarter of 2022. Last February, management authorized a new $150-million program upon completion of the previous program. At the first-quarter-end, PRA Group had $127.7 million under its share buyback authorization.
Financial Update (as of Mar 31, 2022)
PRAA had total assets worth $4,257.8 million at the first-quarter-end, down from the $4,366.2 million level at 2021 end. Cash and cash equivalents in the quarter under discussion were $79.1 million, down from $87.5 million at 2021 end.
At the end of the March quarter, borrowings decreased to $2,539.5 million from $2,608.7 million at 2021 end. PRA Group exited the first quarter with a total equity of $1,346.2 million, up from $1,324.8 million on Dec 31, 2021.
Net cash used in operating activities amounted to $22.7 million in the first quarter compared with the operating cash flow of $20.2 million a year ago.
Forward View
PRA Group has plans to keep boosting its products and the market share. It expects the sales volume to increase by 2022 end. PRAA intends to report the second-quarter results on Aug 8, 2022, after the market closes. The Zacks Consensus Estimate for second-quarter earnings is currently pegged at 53 cents per share, indicating a 56.6% decline from the year-ago quarter’s actuals.
Zacks Rank & Key Picks
PRA Group currently has a Zacks Rank #3 (Hold). Some better-ranked players in the Finance space are Alerus Financial Corporation ALRS, Burford Capital Limited BUR and Columbia Financial, Inc. CLBK, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Based in Grand Forks, ND, the consensus mark for Alerus Financial’s bottom line for 2022 is pegged at $2.48 per share. The stock has witnessed three upward estimates in the past 30 days and no movement in the opposite direction. ALRS beat on earnings in each of the last four quarters, the average being26.8%.
Burford Capital, based in Saint Peter Port, Guernsey, is expected to witness a 372.7% year-over-year increase in its bottom line this year. The earnings estimate has been stable over the past month. Further, BUR’s revenues are expected to increase 19.9% from the year-ago reported figure to $428 million.
Headquartered in Fair Lawn, NJ, Columbia Financial has witnessed one northbound earnings estimate revision against none in the southward direction, in the past month. The consensus estimate for CLBK’s top line indicates a 7.7% increase this year from the prior-year reported number. CLBK beat on earnings in three of the last four quarters and missed on the metric just once, the average surprise being 12.3%.
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