PRA Group, Inc.’s PRAA shares gained 17.8% since it reported third-quarter 2024 results on Nov. 6, 2024. The strong quarterly results benefited from strong cash collections and purchases in the third quarter. Moreover, the company showed optimism in achieving its 2024 targets and expects accelerated progress in 2025, driving investor confidence upward. However, rising expenses partially offset the positives.

PRAA reported third-quarter 2024 earnings per share of 49 cents, which beat the Zacks Consensus Estimate by 44.1%. A loss of 31 cents per share was incurred in the prior-year quarter.

Total revenues climbed 30.1% year over year to $281.5 million. The top line surpassed the consensus mark by 6.4%.

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PRA Group, Inc. Price, Consensus and EPS Surprise

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

Quarterly Operational Update

PRA Group’s cash collections were $477.1 million, which increased 13.7% year over year but missed the Zacks Consensus Estimate of $483 million. The metric benefited on the back of improved cash collections across the United States and Europe.

Portfolio income rose 13.8% year over year to $216.1 million but missed the consensus mark of $218 million. Other revenues of $4.7 million increased 9.9% year over year and beat the Zacks Consensus Estimate of $2.3 million. 

Total operating expenses escalated 10.4% year over year to $191.5 million due to increased compensation and employee services, legal collection costs and fees, agency fees and other operating expenses.

PRAA reported a net income of $27.2 million against a loss of $12.2 million in the prior-year quarter.

The company purchased nonperforming loan portfolios of $350 million, up 12% year over year. The cash efficiency ratio was 60.1%. The estimated remaining collections (ERC) amounted to $7.3 billion at the third-quarter end.

Financial Update (as of Sept. 30, 2024)

PRA Group exited the third quarter with cash and cash equivalents of $141.1 million, which grew 25.4% from the 2023-end level. It had $1 billion remaining under its credit facilities at the third-quarter end.

Total assets of $4.9 billion increased 9.1% from the figure at 2023-end.

Borrowings were $3.3 billion, up 13.1% from the figure as of Dec. 31, 2023.

Total equity of $1.3 billion increased 3.4% from the 2023-end level.

Revised Outlook

For 2024, the company still expects solid portfolio investment levels on the back of higher U.S. portfolio supply and favorable returns. PRAA continues to forecast cash collections to witness double-digit growth. Management expects legal collection costs in the fourth quarter to be in the low $30 million. Modest expense growth is expected for 2024.

The effective tax rate is expected to be in the high to mid-teens range this year. The cash efficiency ratio is projected at around 60% for 2024. It now expects a return on average tangible equity of more than 8%. PRA Group is likely to collect an ERC balance of $1.7 billion within the next 12 months.

For 2025, the company expects portfolio purchases to surpass $1 billion. Cash collections are expected to grow in the range of 8%-10% in 2025. The cash efficiency ratio is projected to be around 60% for 2025. PRAA anticipates a double digit return on average tangible equity for 2025.

Zacks Rank

PRA Group currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Sector Players

Marsh & McLennan Companies, Inc. MMC posted third-quarter 2024 adjusted earnings per share of $1.63, which beat the Zacks Consensus Estimate by 1.2%. The bottom line advanced 3.8% year over year. Consolidated revenues rose 6% year over year to $5.7 billion. The figure also improved 5% on an underlying basis. The top line, however, fell 0.2% short of the consensus mark. 

Marsh & McLennan’s adjusted operating income was $1.19 billion in the third quarter, which grew 12% year over year but missed our estimate of $1.21 billion. 

Arthur J. Gallagher & Co. AJG reported third-quarter 2024 adjusted net earnings of $2.26 per share, meeting the Zacks Consensus Estimate. The bottom line increased 13% on a year-over-year basis. Total adjusted revenues of $2.7 billion missed the Zacks Consensus Estimate by 0.1%. However, the top line improved 11.1% year over year.

EBITDAC grew 14.3% from the prior-year quarter to $808.8 million.

Aon plc AON reported third-quarter 2024 adjusted earnings of $2.72 per share, which beat the Zacks Consensus Estimate by 11%. The bottom line advanced 17% year over year. Total revenues of $3.72 billion improved 26% year over year. The top line beat the consensus mark by 0.5%. It consisted of organic revenue growth of 7% and a 19% revenue rise from acquisitions.

Revenues are expected to register mid-single-digit or higher organic growth for 2024 and beyond. The company anticipates the adjusted operating margin to expand in 2024.

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