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PRA Health (PRAH) Q2 Earnings and Revenues Beat Estimates

Zacks Equity Research

PRA Health Sciences, Inc. PRAH reported second-quarter 2020 EPS of 86 cents, beating the Zacks Consensus Estimate of 82 cents by 4.9%. The bottom line fell from the prior-year quarter tally by 29.5%.

The company registered revenues of $729.9 million in the quarter under review, down 4.4% year over year and 3.8% at cc.The figure surpassed the Zacks Consensus Estimate of $718 million by 1.7%.

Results in Detail

Segmental Analysis

Net new business at the Clinical Research segment came in at $701.6 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 $667.3 million, down 4.9% year over year while revenues at the Data Solutions segment amounted to $62.6 million, up 2.5% year over year.

Direct Costs

Direct costs totaled $395.3 million in the quarter, up 2.4% from the prior-year quarter. Per management, the increase was primarily driven by a rise in labor-related costs at the Clinical Research and higher data costs in Data Solutions segments.

Margin Trend

Gross profit came in at $334.6 million, down 11.2%.

Gross margin came in at 45.8%, highlighting a contraction of 356 basis points (bps).

Adjusted operating profit in the quarter grossed $224.6 million, down 19.3% from the year-ago quarter. Adjusted operating margin in the quarter was 30.8%, down 569 bps.

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

 

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

Financial Update

The company exited the second quarter of 2020 with cash and cash equivalents of $168.2 million, up from $150.8 million at the end of the first quarter.

Cumulative net cash provided by operating activities in the second quarter totaled $86.5 million against net cash used of $4.8 million in the year-ago period.

2020 Guidance

For 2020, PRA Health expects revenues within $3.07-$3.13 billion. The Zacks Consensus Estimate for the same stands at $3.06 billion.

Adjusted EPS for 2020 is expected within $4.35-$4.55. The Zacks Consensus Estimate for the same stands at $4.40.

For the third quarter of 2020, the company’s total revenues are estimated between $754 million and $784 million.The Zacks Consensus Estimate for the same stands at $752.6 million.

Adjusted EPS for the third quarter is projected between $1.09 and $1.19.The Zacks Consensus Estimate for the same stands at $1.10.

Our Take

PRA Health ended the second quarter on a strong note. Solid performance by the Data Solutions segment is a major positive. PRA Health continues to gain from large pharmaceutical companies and is also well-poised on CRO market prospects.

On the flip side, direct costs shot up in the quarter under review. Contraction in both margins is a concern as well. Revenue decline in the Clinical Research segment during the quarter is also worrisome.

Zacks Rank and Key Picks

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

A few better-ranked stocks in the broader medical space are Thermo Fisher Scientific Inc. TMO, PerkinElmer, Inc. PKI and OPKO Health, Inc. OPK. While PerkinElmer sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

OPKO Health reported second-quarter 2020 EPS of 5 cents against the Zacks Consensus Estimate of a loss of 7 cents per share. Revenues of $301.2 million surpassed the consensus estimate by 28.4%.

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