It has been about a month since the last earnings report for PRA Group (PRAA). Shares have added about 2.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PRA Group due for a pullback? 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 drivers.
PRA Group Q2 Earnings Surpass Estimates, Soar Y/Y
PRA Group’s second-quarter 2020 earnings per share of $1.26 beat the Zacks Consensus Estimate by 82.6%. Moreover, the bottom line skyrocketed 207.3% year over year, primarily owing to improved top-line growth.
Revenues of $272 million were also up 7.9% from the year-ago quarter, courtesy of portfolio income. Further, the top line surpassed the Zacks Consensus Estimate by 3.4%.
The company’s cash collection of $509.9 million climbed 8% from the year-ago figure on the back of higher contributions from Americas Core. Cash collections in the quarter were solid in the United States.
Quarterly Operational Update
PRA Group’s fee income of $2.6 million dipped 2.5% year over year.
The company’s portfolio income came in at $248.3 million in the quarter under review, against income recognized on finance receivables of $249.2 million in the prior-year quarter.
Total operating expenses decreased 14.3% over year to $160.6 million, mainly owing lower legal collection fees amid the closure of courts in many European countries because of the COVID-19 pandemic. Moreover, lower compensation and employee benefits as a result of trimmed U.S. call center staff also contributed to this upside.
The company spent $164.5 million on finance receivables in the quarter under review.
As of Jun 30, 2020, it had total assets worth $4.2 billion, down 5.1% from the level at 2019 end.
PRA Group exited the quarter with total equity of $1.1 billion, down 2.6% from the level on Dec 31, 2019.
Cash and cash equivalents in the quarter under discussion were $115.7 million, down 3.4% from the level at 2019 end.
At the end of the second quarter, borrowings decreased 8.1% to $2.6 billion from the number at 2019 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
Currently, PRA Group has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PRA Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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