PRA Health Sciences Inc. PRAH reported adjusted earnings (including stock-based compensation expense) of 50 cents per share in the third quarter of 2015, which managed to outpace the Zacks Consensus Estimate of 41 cents. Adjusted earnings surged 58.5% on a year-over-year basis, primarily on the back of an improved top line.
Quarter Details
Total revenue grew 6.9% on a year-over-year basis to $403.5 million, comfortably surpassing the Zacks Consensus Estimate of $347 million. The year-over-year upside can be attributed to higher service revenues.
Service revenues were up 7.8% (12% on a constant currency basis) to $345.1 million. Net new business in the third quarter amounted to $431.4 million, reflecting a book-to-bill ratio of 1.25. Net new business resulted in a backlog of $2.3 billion as on Sep 30.
Direct costs, as a percentage of revenues, were reported at 61.7% of service revenues during the third quarter of 2015 as compared to 67.4% in the year-ago quarter..
Selling, general and administrative expenses, as a percentage of service revenues, were reported at 18.3% of service revenues during the reported quarter as compared to 19.8% in the year-ago quarter.
Adjusted EBITDA increased 41.6% on a year-over-year basis to $66.6 million.
2015 Outlook
PRA Health updated its outlook for 2015, taking into consideration improved business fundamentals and current foreign exchange fluctuations.
The company raised its service revenue projection to a range of $1.365 billion to $1.370 billion, from the previously guided range of $1.34–$1.39 billion.
PRA Health now expects adjusted earnings for 2015 in the band of $1.89–$1.92 (considering the foreign exchange rates as of Oct 15, 2015), compared with the previous projection of $1.75–$1.85.
Our Take
We believe PRA Health’s healthy product portfolio and industry recognitions will significantly enhance the company’s long-term prospects. Additionally, a raised EPS outlook for 2015 bodes well.
Zacks Rank & Key Picks
Currently, PRA Health sports a Zacks Rank #1 (Strong Buy).
Other favorably ranked stocks in the medical sector include EDAP TMS SA EDAP, MedAssets, Inc. MDAS and Masimo Corp. MASI. All the stocks sport a Zacks Rank #1.
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