PRA Group, Inc. (PRAA) reported a fourth-quarter 2023 loss of 22 cents per share, surpassing the Zacks Consensus Estimate. This marks a considerable improvement from the loss of 35 cents per share that was anticipated. Notably, the company had reported earnings of 41 cents per share in the prior-year quarter.
Total revenues of $221.4 million were 0.6% lower than the previous year but exceeded the consensus estimate by 5.3%.
PRA Group Surges on Robust Portfolio Income
The fourth-quarter results were bolstered by strong portfolio income, increasing cash collection, improving pricing, and enhanced operational performance in Brazil and Europe, which propelled the company’s shares by 12.4% in the pre-market session. However, these gains were somewhat offset by rising expenses and weaknesses in the U.S. business.
PRA Group, Inc. Price, Consensus and EPS Surprise
The company also reported positive news in the fourth quarter, showcasing progress compared to the Zacks Consensus Estimate.
Quarterly Operational Performance
Total cash collections grew 4.8% year over year to $410.3 million, driven by higher cash collections from Brazil and Europe. However, the company slightly missed the Zacks Consensus Estimate in this regard.
The portfolio income of $194.6 million advanced 5.3% year over year in the fourth quarter, slightly outperforming the consensus. Meanwhile, other revenues also saw a 4.8% increase year over year, exceeding $4 million but falling short of the consensus mark by 4.6%.
Total operating expenses surged 7.6% year over year to $175.9 million due to increased compensation and employee services, legal collection costs, agency fees, communication, and other operating expenses.
PRA Group reported a net loss of $5.9 million in the quarter under review, a stark contrast with the net income of $17.1 million in the prior-year quarter.
Financial Update (As of Dec 31, 2023)
PRA Group concluded the fourth quarter with $112.5 million in cash and cash equivalents, significantly higher than the $83.4 million reported at the end of 2022. The company also had $1.3 billion remaining under its credit facilities.
However, the company’s total assets increased to $4.5 billion from $4.2 billion in 2022, while borrowings jumped to $2.9 billion from $2.5 billion. Total equity slipped to $1.2 billion from the previous year’s level of $1.3 billion.
Full Year Results and Future Prospects
For 2023, PRA Group reported a 17% decrease in total revenues from the previous year to $802.6 million, as a result of lower portfolio income and other revenues. Furthermore, total operating expenses rose 3.1% year over year to $702.1 million. The company reported a loss per share of $2.13 for 2023, a significant downturn from its earnings of $2.94 in 2022.
However, the company foresees solid portfolio investment levels in 2024, driven by higher U.S. portfolio supply and favorable returns. PRAA also anticipates double-digit growth in cash collections for the year. Additionally, its shift to lower-cost locations and expense management is likely to result in modest expense growth.
The effective tax rate is expected to be in the low 20% range in 2024, with the cash efficiency ratio projected at over 60%. The company expects a return on average tangible equity within 6-8% for the year and anticipates a $1.5 billion balance in estimated remaining collections within the next 12 months.
Wrapping up
While PRA Group currently holds a Zacks Rank #3 (Hold), it is essential to note the achievements of other companies in the finance industry that have secured favorable rankings, such as Alerus Financial Corporation (ALRS), World Acceptance Corporation (WRLD), and Primis Financial Corp. (FRST), each currently sporting a Zacks Rank #1 (Strong Buy) at present. These companies have shown promise and can serve as benchmarks for investors looking for higher returns.
To delve more into the financial details, check out the full report on Zacks.com.
