PRA Group Pre-Q3 Earnings: Should You Buy the Stock Now?

Financial and business services company PRA Group, Inc. PRAA is set to report its third-quarter 2024 results on Nov. 4, 2024, after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at 34 cents per share and $264.48 million, respectively.

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The earnings estimate for the to-be-reported quarter has remained stable over the past 60 days. The bottom-line projection indicates a year-over-year surge of 209.7%. Also, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year increase of 22.2%.

Zacks Investment Research Image Source: Zacks Investment Research

For the current year, the Zacks Consensus Estimate for PRA Group’s revenues is pegged at $1.07 billion, implying a rise of 33.8% year over year. Also, the consensus mark for current year EPS is pegged at $1.33, implying a jump of 162.4% on a year-over-year basis.

PRA Group beat the consensus estimate for earnings in each of the trailing four quarters, with the average surprise being 299.4%, as you can see below.

PRA Group, Inc. Price and EPS Surprise

PRA Group, Inc. Price and EPS Surprise

PRA Group, Inc. price-eps-surprise | PRA Group, Inc. Quote

PRAA’s Q3 Earnings Whispers

However, our proven model does not conclusively predict an earnings beat for PRA Group this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.

PRAA has an Earnings ESP of 0.00% and a Zacks Rank #2.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s see how things have shaped up before the third-quarter earnings announcement.

Q3 Factors to Note for PRAA

PRA Group is expected to have witnessed improved cash collections, higher portfolio income and solid purchasing activity in the third quarter. Growing strength in its European business is expected to have benefited its collections. The Zacks Consensus Estimate for third-quarter total cash collections indicates 15.1% year-over-year growth.

Moreover, improved portfolio supply and pricing in the United States are likely to have aided its purchases. The Zacks Consensus Estimate for third-quarter Portfolio income is pegged at $218.3 million, indicating a rise of 14.9% year over year.

Also, the consensus mark for changes in expected recoveries currently stands at $37 million, up 67% year over year. Legal collection spending is likely to moderate in the third quarter.

The above-mentioned factors are likely to have positioned the company for year-over-year growth. However, the consensus mark for other revenues is pegged at $2.3 million, down 46.2% from a year ago.

Total operating expenses are likely to have escalated in the quarter due to increased compensation and employee services, agency fees and other operating expenses, trimming its margins, making an earnings beat uncertain. As the company continues to undertake several initiatives to drive improvement in customer contact rates and expand legal processes, expenses are expected to rise as a result.

PRAA’s Price Performance Comparison

PRA Group's stock has declined 23.7% in the year-to-date period against the industry’s rise of 9.2%. In comparison, some of its peers, like Encore Capital Group, Inc. ECPG and Credit Acceptance Corporation CACC, have fallen 8.6% and 13.3%, respectively, during this time. All of these had lagged the S&P 500 significantly, which has increased 22.2% during the same period.

PRAA YTD Price Performance

Zacks Investment Research Image Source: Zacks Investment Research

PRAA’s Valuation

Now, let’s look at the value PRA Group offers investors at current levels.

The company’s valuation looks relatively cheap compared with the industry average. Currently, PRAA is trading at 10.54X forward 12 months earnings, below the industry’s average of 15.04X.

Zacks Investment Research Image Source: Zacks Investment Research

What Should Investors Do?

Rising portfolio income, as a result of higher portfolio purchases, will support the company’s top-line growth in the coming days. Also, normalizing credit supply in the United States will likely lead to improved portfolio supply coupled with better returns.

Although its leverage increased from 2021 levels, the current levels are not expected to constrain the company from capitalizing on supply growth. The company’s focus on improving efficiencies will further support its margin growth.

With its improving cash collection, growing purchase volume, portfolio income and attractive valuation, current shareholders might consider holding. Prospective investors could see a buying opportunity and watch upcoming earnings for further insights.

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PRA Group, Inc. (PRAA) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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