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PRA Group (PRAA) Down 5.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for PRA Group (PRAA). Shares have lost about 5.8% 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 Group due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PRA Group Q1 Earnings & Revenues Beat Estimates

PRA Group reported first-quarter 2022 earnings per share of 97 cents, beating the Zacks Consensus Estimate of 74 cents. However, the bottom line decreased from $1.27 per share a year ago.

Total revenues of $240.6 million were down from the year-ago quarter’s $289.5 million. Also, the top line missed the Zacks Consensus Estimate of $251 million.

PRAA reported better-than-expected earnings, supported by decreased operating expenses. The positives were partially offset by reduced cash collections in the Americas and Australia Core, coupled with reduced fee income.

Quarterly Operational Update

PRAA’s cash collection of $481 million decreased from the year-ago figure of $555.9 million due to a decrease in the Americas and Australia Core collections. U.S. call center and other collections declined 27% year over year in the first quarter. Similar traits were witnessed in the U.S. legal collections.

PRA Group’s fee income of $1.8 million decreased from $2.2 million a year ago. Its portfolio income came in at $207.5 million during the quarter under review, down from $231.7 million in the prior-year quarter.

Total operating expenses were down to $168.6 million from $178.7 million a year ago on lower compensation and employee services, legal collection costs and fees, and outside fees and services.

PRA Group purchased $147.5 million of nonperforming loan portfolios in the quarter under review. Its cash efficiency ratio declined to 65.1% in the first quarter, down from 68% in the year-ago period. Estimated remaining collections in the first quarter were $5.7 billion, majority of which were in the United States.

Share Repurchase Update

PRAA bought back shares worth $40 million in the first quarter of 2022. Last February, management authorized a new $150-million program upon completion of the previous program. At the first-quarter-end, PRA Group had $127.7 million under its share buyback authorization.

Financial Update (as of Mar 31, 2022)

PRAA had total assets worth $4,257.8 million at the first-quarter-end, down from the $4,366.2 million level at 2021 end. Cash and cash equivalents in the quarter under discussion were $79.1 million, down from $87.5 million at 2021 end.

At the end of the March quarter, borrowings decreased to $2,539.5 million from $2,608.7 million at 2021 end. PRA Group exited the first quarter with a total equity of $1,346.2 million, up from $1,324.8 million on Dec 31, 2021.

Net cash used in operating activities amounted to $22.7 million in the first quarter compared with the operating cash flow of $20.2 million a year ago.

Forward View

PRA Group has plans to keep boosting its products and the market share. It expects the sales volume to increase by 2022 end. PRAA intends to report the second-quarter results on Aug 8, 2022, after the market closes. The Zacks Consensus Estimate for second-quarter earnings is currently pegged at 53 cents per share, indicating a 56.6% decline from the year-ago quarter’s actuals.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -20.23% due to these changes.

VGM Scores

Currently, PRA Group has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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.

Performance of an Industry Player

PRA Group belongs to the Zacks Financial - Miscellaneous Services industry. Another stock from the same industry, Euronet Worldwide (EEFT), has gained 7.4% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Euronet Worldwide reported revenues of $718.5 million in the last reported quarter, representing a year-over-year change of +10.1%. EPS of $0.69 for the same period compares with $0.23 a year ago.

Euronet Worldwide is expected to post earnings of $1.64 per share for the current quarter, representing a year-over-year change of +209.4%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Euronet Worldwide. Also, the stock has a VGM Score of C.


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