PRA Group's Q1 Earnings Miss Estimates on Rising Legal Collection Costs

Shares of PRA Group, Inc. PRAA declined 30.8% since it reported first-quarter 2025 results on May 5. The quarterly results suffered due to rising operating costs attributed to higher legal collection costs and fees. A 60.2% plunge in other revenues also hurt the results. Nevertheless, the downside was partly offset by improved cash collections and higher portfolio income.

PRAA reported earnings per share of nine cents, which lagged the Zacks Consensus Estimate by 78.1%. The bottom line remained flat year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Total revenues improved 5.5% year over year to $269.6 million. The top line missed the consensus mark by 4.6%.

PRA Group, Inc. Price, Consensus and EPS Surprise

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

PRA Group’s Quarterly Operational Update

PRA Group’s cash collections were $497.4 million, which advanced 10.7% year over year but missed the Zacks Consensus Estimate of $519.2 million. The metric was aided by higher cash collections across the United States and Europe.

Portfolio income rose 19.3% year over year to $241 million but fell short of the consensus mark of $249 million. Other revenues of $0.7 million dropped 60.2% year over year and missed the consensus mark of $1.2 million.  

Total operating expenses rose 3.1% year over year to $195 million due to increased legal collection costs, legal collection fees and other operating expenses. 

PRAA’s net income of $9.1 million tumbled 22.9% year over year in the first quarter.  

The company purchased nonperforming loan portfolios of $291.7 million, which advanced 18.7% year over year. The cash efficiency ratio improved 284 basis points year over year to 60.8%. The estimated remaining collections amounted to $7.8 billion at the first-quarter end, up 20.1% year over year.

PRAA’s Financial Update (as of March 31, 2025)

PRA Group exited the first quarter with cash and cash equivalents of $128.7 million, which advanced 21.4% from the figure at 2024-end. It had $919 million remaining under its credit facilities at the first-quarter end.

Total assets of $5.1 billion increased 4.4% from the 2024-end level.

Borrowings were $3.5 billion, which rose 4.2% from the figure as of Dec. 31, 2024.

Total equity of $1.3 billion improved 7.3% from the 2024-end level.

PRAA’s 2025 Outlook

Earlier, management estimated portfolio investments of $1.2 billion for 2025. PRAA forecasted cash collections to witness high-single-digit growth as a result of strong portfolio purchases and benefits from cash-generating initiatives. 

The cash efficiency ratio was projected to be more than 60% in 2025. The company expected a return on average tangible equity of around 12%.

PRAA’s 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.

Other Finance Sector Releases

Of the other Finance sector players that have reported first-quarter results so far, the bottom-line results of American Express Company AXP,  Virtu Financial, Inc. VIRT and Synchrony Financial SYF beat the respective Zacks Consensus Estimate.

American Express reported first-quarter 2025 earnings per share (EPS) of $3.64, which beat the Zacks Consensus Estimate by 5.5%. The bottom line climbed 9% year over year. Total revenues, net of interest expense, amounted to $16.97 billion, which missed the consensus estimate by 0.2%. The top line improved 7% year over year. Network volumes of $439.6 billion rose 5% year over year in the first quarter. Total interest income of $6.1 billion increased 6% year over year and beat the consensus mark by 1%. 

The U.S. Consumer Services segment’s pre-tax income of $1.7 billion improved 7% year over year in the first quarter. Total revenues, net of interest expenses, climbed 10% year over year to $8.2 billion. The Commercial Services segment recorded a pre-tax income of $836 million in the quarter under review, which fell 5% year over year. The International Card Services segment reported a pre-tax income of $381 million, which jumped 51% year over year. Total revenues, net of interest expense, improved 8% year over year to $2.9 billion. 

Virtu Financial’s first-quarter adjusted EPS of $1.30 beat the Zacks Consensus Estimate by 9.2%. The bottom line soared 71.1% year over year. Adjusted net trading income of $497.1 million advanced 35.5% year over year. The top line surpassed the consensus estimate by 4.7%. Revenues from commissions, net and technology services rose 27.6% year over year to $151.3 million. Interest and dividend income of $109.1 million increased 2.9% year over year. 

Adjusted EBITDA was $319.9 million, which climbed 57.7% year over year and came higher than our estimate of $246.2 million. Adjusted EBITDA margin improved 910 basis points year over year to 64.4%. In the Market Making segment, adjusted net trading income was $382 million in the first quarter, which climbed 39.6% year over year. The Execution Services unit recorded an adjusted net trading income of $115.1 million, which advanced 23.5% year over year. 

Synchrony Financial reported first-quarter 2025 adjusted EPS of $1.89, which outpaced the Zacks Consensus Estimate by 16%. However, the bottom line declined 39.8% year over year. Net interest income was $4.5 billion, which inched up 1.3% year over year. However, it missed the consensus mark by 1.8%. Retailer share arrangements of Synchrony advanced 17% year over year to $895 million in the first quarter. Total loan receivables of $99.6 billion slipped 2% year over year.  

Total deposits dipped 0.1% year over year to $83.4 billion and fell short of our estimate of $84.5 billion. Synchrony’s purchase volume fell 4% year over year to $40.7 billion. Interest and fees on loans totaled $5.3 billion, which remained relatively flat year over year. Net interest margin improved 19 basis points year over year to 14.74% in the first quarter. Average active accounts of 69.3 million slipped 3% year over year.  Home & Auto period-end loan receivables decreased 6.6% year over year in the first quarter. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research