Why Is PRA Group (PRAA) Down 19.4% Since Last Earnings Report?

It has been about a month since the last earnings report for PRA Group (PRAA). Shares have lost about 19.4% 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 Q4 Earnings Beat Estimates, Improve Y/Y

PRA Group’s fourth-quarter 2019 earnings per share of 60 cents beat the Zacks Consensus Estimate by 20%, mainly attributable to growth in revenues. Moreover, the bottom line soared 81.8% year over year.

Revenues of $269 million were up 13.5% from the year-ago quarter.

However, the top line beat the Zacks Consensus Estimate by 6.7% on the back of higher income recognized on finance receivables as well as other revenues.

The company’s cash collection of $456.6 million rose 13% from the figure reported in the fourth quarter of 2018 on the back of higher contributions by Americas Core, Europe Core and Europe Insolvency.

Quarterly Operational Update

PRA Group’s fee income of $4.3 million decreased 8.3% year over year.

The company’s income recognized on finance receivables during the reported quarter grew 13.8% year over year to $262.8 million.

Total operating expenses inched up 1.4% year over year to $185.8 million.

This increase was due to higher agency and legal collection fees.

Business Update

The company spent $402.3 million on finance receivables in the quarter under review.

Full-Year Highlights

In 2019, the company’s total revenues were up 12% year over year to $1 billion.

In 2019, the company spent $1.3 billion on finance receivables.

The company’s global cash collections of $1.8 billion were up 13% year over year.

It also reported record portfolio purchases worth $1.2 billion excluding business acquisitions, reflecting an increase of 11% from the 2018 reported figure.

Financial Update

As of Dec 31, 2019, the company had total assets of $4.4 billion, up 13.2% from the level at 2018 end.

PRA Group exited the quarter with total equity of $1.2 billion, up 9.2% from the level on Dec 31, 2018.

Cash and cash equivalents in the quarter under discussion were $119.7 million, up 21.4% from the level at 2018 end.

In the quarter under review, borrowings increased 13.5% to $2.8 billion from the number at 2018 end.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 18.74% due to these changes.

VGM Scores

Currently, PRA Group has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

PRA Group has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.