PRA Group's Shares Up 17.8% Since Q3 Earnings Beat Estimates

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What are the Zacks Style Scores?

The Zacks Style Scores, developed alongside the Zacks Rank, are complementary indicators that rate stocks based on three widely-followed investing methodologies; they also help investors pick stocks with the best chances of beating the market over the next 30 days.

Each stock is given an alphabetic rating of A, B, C, D or F based on their value, growth, and momentum qualities. With this system, an A is better than a B, a B is better than a C, and so on, meaning the better the score, the better chance the stock will outperform.

The Style Scores are broken down into four categories:

Value Score

Value investors love finding good stocks at good prices, especially before the broader market catches on to a stock's true value. Utilizing ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and many other multiples, the Value Style Score identifies the most attractive and most discounted stocks.

Growth Score

Growth investors are more concerned with a stock's future prospects, and the overall financial health and strength of a company. Thus, the Growth Style Score analyzes characteristics like projected and historic earnings, sales, and cash flow to find stocks that will see sustainable growth over time.

Momentum Score

Momentum trading is all about taking advantage of upward or downward trends in a stock's price or earnings outlook, and these investors live by the saying "the trend is your friend." The Momentum Style Score can pinpoint good times to build a position in a stock, using factors like one-week price change and the monthly percentage change in earnings estimates.

VGM Score

If you want a combination of all three Style Scores, then the VGM Score will be your friend. It rates each stock on their combined weighted styles, helping you find the companies with the most attractive value, best growth forecast, and most promising momentum. It's also one of the best indicators to use with the Zacks Rank.

How Style Scores Work with the Zacks Rank

The Zacks Rank is a proprietary stock-rating model that harnesses the power of earnings estimate revisions, or changes to a company's earnings expectations, to help investors build a successful portfolio.

#1 (Strong Buy) stocks have produced an unmatched +25.41% average annual return since 1988, which is more than double the S&P 500's performance over the same time frame. However, the Zacks Rank examines a ton of stocks, and there can be more than 200 companies with a Strong Buy rank, and another 600 with a #2 (Buy) rank, on any given day.

This totals more than 800 top-rated stocks, and it can be overwhelming to try and pick the best stocks for you and your portfolio.

That's where the Style Scores come in.

To maximize your returns, you want to buy stocks with the highest probability of success. This means picking stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B. If you find yourself looking at stocks with a #3 (Hold) rank, make sure they have Scores of A or B as well to ensure as much upside potential as possible.

As mentioned above, the Scores are designed to work with the Zacks Rank, so any change to a company's earnings outlook should be a deciding factor when picking which stocks to buy.

For instance, a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one that boasts Scores of A and B, still has a downward-trending earnings forecast, and a much greater likelihood its share price will decline as well.

Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.

Stock to Watch: PRA Group (PRAA)

Headquartered in Norfolk, VA, and incorporated in Delaware, PRA Group, Inc. is a global financial and business services company in the Americas, Australia and Europe.

PRAA is a #3 (Hold) on the Zacks Rank, with a VGM Score of B.

Momentum investors should take note of this Finance stock. PRAA has a Momentum Style Score of A, and shares are up 16.9% over the past four weeks.

For fiscal 2024, two analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.58 to $1.71 per share. PRAA boasts an average earnings surprise of 305.3%.

With a solid Zacks Rank and top-tier Momentum and VGM Style Scores, PRAA should be on investors' short list.

Zacks Investment Research

MarketAxess Holdings Inc. MKTX has reported third-quarter 2024 earnings per share of $1.90, which surpassed the Zacks Consensus Estimate by 4.4%. The bottom line grew 30.1% year over year.

Total revenues of $206.7 million rose 20% year over year. The top line surpassed the consensus mark by a whisker.

The strong quarterly results were driven by improving U.S. high-grade, emerging markets and Eurobonds commission revenues. Higher service revenues added to the upside. Geographic expansion and product diversification drove the average daily volume (ADV) of emerging markets and Eurobonds. However, the upside was partly offset by an elevated expense level.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

MarketAxess Holdings Inc. Price, Consensus and EPS Surprise

MarketAxess Holdings Inc. price-consensus-eps-surprise-chart | MarketAxess Holdings Inc. Quote

Quarterly Operational Update

Commission revenues were $180.4 million, which increased 20% year over year, and beat the Zacks Consensus Estimate of $178.7 million and our estimate of $168.7 million. The improvement in the metric was driven by better commission revenues in the U.S. high-grade, Eurobonds and emerging markets. Information services’ revenues improved 10% year over year to $13 million. The figure beat the consensus mark of $12.8 million and our estimate of $12 million. The metric benefited on the back of net new data contract revenues.

Post-trade services revenues of $10.4 million improved 6% year over year, attributable to net new contract revenues. However, the reported figure missed the consensus mark by 2.5%. Revenues from the Pragma acquisition were $7.7 million.

Total expenses of $119.7 million escalated 14% year over year due to higher employee compensation and benefits, technology and communication and marketing and advertising expenses. However, the metric fell marginally short of our estimate of $119.9 million.

MKTX’s operating income rose 30% year over year to $87.1 million, beating our estimate of $74.7 million. EBITDA of $105 million improved 27% year over year and the EBITDA margin improved 270 bps to 50.8%.

Trading Volumes in Detail

The high-grade trading volume of MarketAxess was $449.7 billion, which improved 38% year over year and beat the Zacks Consensus Estimate of $449.7 billion. The ADV of the same product category improved 36% year over year to $7 billion, beating the consensus mark of $6.6 billion and our estimate of $6.3 billion.

However, high-yield trading volume improved 0.3% year over year, while its ADV fell 1% due to a reduced level of credit spread volatility.

Other credit trading volume jumped 49% to $37.6 billion, whereas ADV for the same product category rose 47% year over year to $587 million.

Trading volume and ADV of emerging markets rose 21% and 19%, respectively, on a year-over-year basis. The Eurobonds’ trading volume and ADV grew 49% and 47%, respectively.

Total credit trading volume of $905.3 billion advanced 29% year over year and surpassed the Zacks Consensus Estimate of $886.2 billion. Total credit ADV rose 27% to $14.1 billion, beating the consensus mark of $13.7 billion and our estimate of $13.3 billion.

Total rates’ trading volume jumped 48% and ADV of this product category improved 38% year over year.

Balance Sheet (As of Sept. 30, 2024)

MarketAxess exited the third quarter with cash and cash equivalents of $446.3 million, which declined 1.1% from the 2023 end. Total assets of $1.8 billion decreased 9% year over year.

The company had no outstanding borrowing under its credit facility at the third-quarter end. Total stockholders’ equity of $1.4 billion grew 7.2% from the 2023 end.

Cash Flows

Cash generated from operations amounted to $95.1 million compared to the previous year's figure of $79.2 million. The free cash flow was $86.3 million, which rose 15.4% year over year.

Capital Deployment Update

MarketAxess bought back shares worth $15 million. The capacity of $236.1 million was left under the company’s authorized repurchase program as of Oct. 31, 2024.

Management approved a quarterly cash dividend of 74 cents per share, which will be paid out on Dec. 4, 2024, to shareholders of record as of Nov. 20.

Zacks Rank

MarketAxess currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Sector Players

Marsh & McLennan Companies, Inc. MMC posted third-quarter 2024 adjusted earnings per share of $1.63, which beat the Zacks Consensus Estimate by 1.2%. The bottom line advanced 3.8% year over year. Consolidated revenues rose 6% year over year to $5.7 billion. The figure also improved 5% on an underlying basis. The top line, however, fell 0.2% short of the consensus mark.

Marsh & McLennan’s adjusted operating income was $1.19 billion in the third quarter, which grew 12% year over year but missed our estimate of $1.21 billion.

Arthur J. Gallagher & Co. AJG reported third-quarter 2024 adjusted net earnings of $2.26 per share, meeting the Zacks Consensus Estimate. The bottom line increased 13% on a year-over-year basis. Total adjusted revenues of $2.7 billion missed the Zacks Consensus Estimate by 0.1%. However, the top line improved 11.1% year over year.

EBITDAC grew 14.3% from the prior-year quarter to $808.8 million.

Aon plc AON reported third-quarter 2024 adjusted earnings of $2.72 per share, which beat the Zacks Consensus Estimate by 11%. The bottom line advanced 17% year over year. Total revenues of $3.72 billion improved 26% year over year. The top line beat the consensus mark by 0.5%. It consisted of organic revenue growth of 7% and a 19% revenue rise from acquisitions.

Revenues are expected to register mid-single-digit or higher organic growth for 2024 and beyond. The company anticipates the adjusted operating margin to expand in 2024.

Zacks Investment Research

PRA Group (PRAA) came out with quarterly earnings of $0.49 per share, beating the Zacks Consensus Estimate of $0.34 per share. This compares to loss of $0.31 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 44.12%. A quarter ago, it was expected that this debt collector would post earnings of $0.05 per share when it actually produced earnings of $0.54, delivering a surprise of 980%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

PRA Group, which belongs to the Zacks Financial - Miscellaneous Services industry, posted revenues of $281.48 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 6.43%. This compares to year-ago revenues of $216.43 million. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

PRA Group shares have lost about 20.5% since the beginning of the year versus the S&P 500's gain of 20.1%.

What's Next for PRA Group?

While PRA Group has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for PRA Group: favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.36 on $269.46 million in revenues for the coming quarter and $1.33 on $1.07 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Financial - Miscellaneous Services is currently in the top 38% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

One other stock from the same industry, AlTi Global, Inc. (ALTI), is yet to report results for the quarter ended September 2024. The results are expected to be released on November 8.

This company is expected to post quarterly earnings of $0.01 per share in its upcoming report, which represents a year-over-year change of -99.2%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

AlTi Global, Inc.'s revenues are expected to be $55.6 million, up 12.9% from the year-ago quarter.

Zacks Investment Research