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PRA Health (PRAH) Q1 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

PRA Health Sciences, Inc. PRAH reported first-quarter 2019 adjusted earnings per share (EPS) of $1.10, which outpaced the Zacks Consensus Estimate of $1.06 by 3.8%. The bottom line rose 29.4% from the prior-year quarter’s tally.
 

PRA Health registered revenues of $722 million in the first quarter, up 2.9% year over year. However, the figure missed the Zacks Consensus Estimate by 1.5%.
 

Q1 in Detail
 

Segmental Analysis
 

Net new business in the Clinical Research segment came in at $664.6 million in the first quarter. Through this segment, the company receives contracts from customers to provide clinical research services with payments based on fixed-fee or fee-for-service arrangements.
 

Revenues in the Clinical Research segment and Data Solutions segment amounted to $666.6 million and $55.4 million, respectively, in the quarter under review. The company provides weekly, monthly or quarterly data reports and analytics to customers.
 

Direct Costs
 

Direct costs totaled $377.9 million in the quarter, down 0.9% year over year.

PRA Health Sciences, Inc. Price, Consensus and EPS Surprise

 

PRA Health Sciences, Inc. Price, Consensus and EPS Surprise | PRA Health Sciences, Inc. Quote

Margin Trend

Gross profit, after excluding direct costs, came in at $344.1 million, up 7.4% from the prior-year quarter's figure. Gross margin, as a percentage of revenues, came in at 47.7%, up 200 bps year over year.
 

Net income from operations, after excluding selling, general and administrative expenses from gross profit, came in at $78.7 million, up 9.4% from the year-ago quarter.
 

Financial Update
 

Cash and cash equivalents as of Mar 31, 2019, came in at $177.1 million, up 22.8% from 2018-end level.
 

Net cash flow from operating activities for the three months ended Mar 31, 2019, amounted to $41 million, up 18.5% from the year-ago quarter.
 

Guidance Reiterated
 

For 2019, PRA Health expects to achieve total revenues between $3.09 billion and $3.20 billion, representing reported and constant currency growth of 8% to 11%, respectively. The Zacks Consensus Estimate of $3.14 billion lies within the guided range.
 

Adjusted EPS for 2019 is expected between $4.93 and $5.08, representing growth of 15% to 19% from 2018. The Zacks Consensus Estimate of $5.03 lies within the guided range.
 

Annual effective income tax rate is estimated to be about 24%.
 

Our Take
 

PRA Health ended the first quarter on a mixed note. A solid EPS view for 2019 instils optimism. Strong performance by the Clinical Research segment is a positive. PRA Health continues to gain from large pharmaceutical companies, which contributed substantially to the top line in recent times. Management is optimistic about the integration of Symphony Health. With this buyout, PRA Health expects to enhance ability in the field of data and analytics. The company is also poised well on CRO market prospects. Direct costs also contracted in the quarter under review. Expansion in gross margin is also a positive.
 

Zacks Rank
 

Currently, PRA Health carries a Zacks Rank of 3 (Hold).
 

Earnings of MedTech Majors at a Glance
 

Some better-ranked stocks which reported solid results this earning season are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.

 

Abbott reported first-quarter 2019 adjusted earnings of 63 cents per share, beating the Zacks Consensus Estimate by 3.3%. First-quarter worldwide sales came in at $7.54 billion, above the Zacks Consensus Estimate of $7.47 billion.
 

CONMED reported first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.

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