PRA Group, Inc. PRAA is set to report second-quarter 2015 earnings results on Aug 10, 2015. Last quarter, it posted a positive earnings surprise of 9.17%. Let us see how things are shaping up for this announcement.
Factors Affecting the Past Quarter
PRA Group’s strength lies in growth of its core portfolios and profitable investments. The company has made significant investments in new portfolios of debt in the U.S. and the U.K., which are expected to stimulate future collections, thereby strengthening the supply and pricing chain as well as the fee income businesses. Moreover, in line with management’s diversification strategy, the U.K. and Spanish operations are expected to show further improvement and boost earnings. We believe that PRA Group’s acquisitions and other strategic initiatives will help in improving its operating performance and bolster the bottom line.
However, the competitive accounts receivable management industry, drop in total estimated collections to purchase price ratio and higher interest expenses remain as concerns.
Earnings Whispers
Our proven model does not conclusively show that PRA Group is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: PRA Group has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.14 per share.
Zacks Rank: PRA Group holds a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, when combined with a 0.00% ESP, surprise prediction becomes difficult.
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks from the finance space which, according to our model, have the right combination of elements to post an earnings beat this quarter:
Ashford Hospitality Trust, Inc. AHT has an Earnings ESP of +8.70% and a Zacks Rank #1 (Strong Buy).
AerCap Holdings N.V. AER has an Earnings ESP of +2.26% and a Zacks Rank #3 (Hold).
Bluerock Residential Growth REIT, Inc. BRG has an Earnings ESP of +7.14% and a Zacks Rank #3.
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