PRA off to a ‘strong start’ in 2015

By Zachary Brennan contact

- Last updated on GMT

Related tags: Pra health sciences, Revenue, Currency

PRA off to a ‘strong start’ in 2015
CRO PRA Health Sciences saw its Q1 revenue climb about 10% on a constant currency basis compared to the same quarter last year.

Net new business for the quarter was $398m, representing a book-to-bill ratio of 1.2 for the period, which puts PRA in the lower end of the pack among its peers. Parexel reported a book-to-bill​ of 1.3 for the quarter, while LabCorp reported​ one of 1.37.

Net book-to-bill of 1.20x is robust, but impressively low cancelations (2.2% vs 3.4% estimate, lowest in 8 qtrs) helped offset gross new bookings that may have been impacted by Fx [foreign exchange]​,” Citi Research analyst Garen Sarafian said in a positive note to investors.

As far as the mix of clients, PRA CEO Colin Shannon told investors on the call Thursday that the company is seeing “slightly higher​” amounts of work from big pharma companies because of their acquisitions of some of the smaller companies that PRA works with.

"We are off to a strong start in 2015 and I am pleased by our first quarter financial results that demonstrate a continuation of the solid momentum we achieved in 2014​," said Shannon. "We continue to win new business, as evidenced by our strong book-to-bill ratio and our $2.2 billion of backlog, the highest level in our company's history​.”

The company also saw a decrease in direct costs as a percentage of service revenue, which it said is primarily related to the favorable impact from foreign currency exchange rate fluctuations. In addition, PRA saw a decrease in selling, general and administrative expenses, which it said is primarily related to its continued leveraging of selling and administrative functions.

Adjusted net income per share rose significantly to $0.41 for the quarter, representing growth of 86% compared to Q1 of 2014.

2015 Guidance

For 2015, the company is slightly lowering its guidance taking into account the movement in current foreign exchange rates.  As a result it expects to achieve service revenues between $1.34bn and $1.39bn, diluted GAAP net income per share between $0.70 and $0.80 per share, diluted Adjusted Net Income per share of $1.62 to $1.72 per share, and annual effective income tax rate estimates at approximately 30%. 

We are raising estimates and our target price based on better than expected 1Q earnings and updated guidance​,” analyst Sarafian said regarding PRA’s stock.

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