Shares of PRA Health Sciences, Inc. PRAH rose 3.Array% to close at $43.97 on Feb 26, following the announcement of its fourth-quarter 20Array5 results.
The contract research organization reported adjusted EPS (including stock-based compensation expense) of 57 cents in the fourth quarter of 20Array5, which managed to outpace the Zacks Consensus Estimate of 48 cents. Adjusted EPS also surged 67.6% on a year-over-year basis, primarily on the back of improved top line and operating margin.
Quarter Details
Total revenue in the quarter rose Array5.9% on a year-over-year basis to $428.9 million. The upside can be attributed to higher service revenues.
Service revenues were up ArrayArray.9% (Array5.Array% on a constant currency basis) to $362.3 million. Meanwhile, net new business in the reported quarter amounted to $459.4 million, reflecting a book-to-bill ratio of Array.27.
The top five clients represented 40.Array% of the company’s revenues in the quarter under review.
Reported direct costs, as a percentage of service revenues, contracted Array60 basis points (bps) on a year-over-year basis to 64.8%. The contraction was primarily due to favorable impact from foreign currency fluctuations.
Selling, general and administrative expenses, as a percentage of service revenues, fell 520 bps to Array7.6%, reflecting management’s success in effectively managing overhead functions.
Adjusted EBITDA (including stock-based compensation expense) increased 32.9% on a year-over-year basis to $66.3 million.
Outlook
Service revenues for 20Array6 are projected in the range of $Array.53–$Array.57 billion, reflecting constant currency growth rate of ArrayArray%–Array4%. Adjusted EPS is expected in the band of $2.32–$2.42.
Our Take
We are impressed with the company’s net new business awards. The year-over-year upside in revenues and EPS are expected to draw investors going forward. The framework agreement to dissolve the WuXi-PRA joint venture is an important development, given that the portion of the joint venture located in Hong Kong will become a wholly owned subsidiary of PRA Health.
Zacks Rank & Other Key Picks
Currently, PRA Health carries a Zacks Rank #Array (Strong Buy).
Other well placed stocks in the broader medical sector are Abiomed ABMD, CryoLife CRY and Luminex LMNX. All the stocks sport a Zacks Rank #Array.
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