Why Is PRA Health Sciences (PRAH) Up 7.3% Since Last Earnings Report?

It has been about a month since the last earnings report for PRA Health Sciences (PRAH). Shares have added about 7.3% 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 Health Sciences 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 Health  Q1 Earnings and Revenues Beat Estimates

PRA Health Sciences, Inc reported first-quarter 2020 adjusted earnings per share 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.

Margin Trend                  

Gross margin came in at 48.5%, highlighting an expansion of 81basis 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 61bps.

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Due to uncertainty regardingthe magnitude and duration of the coronavirus pandemic, the company has withdrawn its 2020 guidance.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

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -24.22% due to these changes.

VGM Scores

At this time, PRA Health Sciences has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 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. It's no surprise PRA Health Sciences has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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