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PRA Health (PRAH) Q1 Earnings and Revenues Beat Estimates

Zacks Equity Research

PRA Health Sciences, Inc. PRAH reported first-quarter 2020 adjusted earnings per share (EPS) of $1.05, which outpaced the Zacks Consensus Estimate of $1.04 by 0.9%. The bottom line fell 4.5% from the prior-year quarter tally.

The company registered revenues of $783.7 million in the quarter under review, up 8.5% year over year and 9.3% on a constant currency (cc) basis. The figure also surpassed the consensus estimate of $761 million by 3%.

Results in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $604.7 million. Through the segment, the company receives contracts to provide clinical research services with payments based on fixed-fee or fee-for-service arrangements.

Revenues at the Clinical Research segment amounted to $726.1 million, up from $666.6 million a year ago. Revenues at the Data Solutions segment amounted to $57.6 million, up from $55.4 million in the year ago period.

Direct Costs

Direct costs totaled $403.9 million in the quarter, compared with $377.9 million in the prior-year quarter. Per management, the increase was primarily driven by a rise in labor-related costs at the Clinical Research and Data Solutions segments.

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

 

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

PRA Health Sciences, Inc. price-consensus-eps-surprise-chart | PRA Health Sciences, Inc. Quote

Margin Trend                  

Gross margin came in at 48.5%, highlighting an expansion of 81 basis points (bps).Operating profit in the quarter grossed $272.9 million, up 10.5% from the year-ago quarter. Adjusted operating margin in the quarter was 34.8%, up 61 bps.

Financial Update

The company exited the first quarter of 2020 with cash and cash equivalents of $150.8 million, down from $236.2 million at the end of 2019.

2020 Guidance

Due to uncertainty regarding the magnitude and duration of the coronavirus pandemic, the company has withdrawn its 2020 guidance.

Nonetheless, for second-quarter 2020, PRA Health expects revenues within $705-$740 million.

Adjusted EPS for second-quarter 2020 is expected within 75-90 cents. The Zacks Consensus Estimate for the same stands at $1.02.

Our Take

PRA Health ended the first quarter on a strong note. Strong performance by the Clinical Research segment is a major positive. PRA Health continues to gain from large pharmaceutical companies, which have contributed substantially to its top line in recent times. Management remains optimistic about the integration of Symphony Health. The company is also well-poised on CRO market prospects. Expansion in both margins is encouraging as well.

On the flip side, direct costs shot up in the quarter under review.

Zacks Rank and Key Picks

PRA Health currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Pacific Biosciences of California, Inc. PACB, Aphria APHA and Exact Sciences EXAS, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Pacific Biosciences’ first-quarter 2020 revenues is pegged at $20.1 million, suggesting a year-over-year riseof 22.3%. The same for loss stands at 15 cents, indicating year-over-year improvement of 25%.

The Zacks Consensus Estimate for Aphria’s fourth-quarter fiscal 2020 revenues is $100.3 million, implying a 4.4% increase from the year-earlier figure.

The Zacks Consensus Estimate for Exact Sciences’ first-quarter fiscal 2020 revenues is pegged at $349.2 million, suggesting year-over-year improvement of 115.5%. The same for loss stands at 60 cents, indicating 9.1% improvement from the year-ago figure.

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