A month has gone by since the last earnings report for PRA Health Sciences (PRAH). Shares have lost about 5.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PRA Health Sciences due for a breakout? 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 Health Q1 Earnings Beat Estimates, Direct Costs Down
PRA Health 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
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 totaled $377.9 million in the quarter, down 0.9% year over year.
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.
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.
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.
Adjusted EPS for 2019 is expected between $4.93 and $5.08, representing growth of 15% to 19% from 2018.
Annual effective income tax rate is estimated to be about 24%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, PRA Health Sciences has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, PRA Health Sciences has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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