Image: PRA Group.

When times are good, it's easier for professional debt collectors to find ways to get borrowers to pay back amounts they owe, and many companies have turned to PRA Group (NASDAQ:PRAA) to help them collect money they're owed rather than trying to go after delinquent debtors themselves. Yet coming into its third-quarter earnings report on Thursday, PRA Group investors are uncertain about whether the company can get itself back on track after an unexpectedly poor set of results in its previous quarterly report in August. Let's take an early look at what's been happening with PRA Group since then and whether it has turned the corner on a brighter future.

Stats on PRA Group

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$259.8 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can PRA Group earnings bounce back?
In recent months, investors have gotten more nervous about PRA Group earnings, cutting their third-quarter projections by about 5% and making more modest cuts to full-year 2015 and 2016 estimates. The stock has struggled as well, falling more than 12% since late July.

PRA Group's second-quarter results in August shocked investors who had gotten used to seeing the company dramatically outperform expectations. Yet even though sales climbed 20% and helped push net income up at an even more impressive 37% rate, much of those favorable comparisons came from a one-time charge in the year-ago period, and PRA Group's results were substantially less than what most investors had expected from the debt collector.

Since then, PRA Group has also had to deal with regulatory scrutiny, and that has recently been costly. In September, the Consumer Financial Protection Bureau settled charges with Encore Capital Group (NASDAQ:ECPG) and PRA Group that had alleged that the two debt-collection specialists had bought debts from other parties that were potentially inaccurate, lacking documentation, or unenforceable. In the CFPB's words, "The companies collected payments by pressuring consumers with false statement and churning out lawsuits using robo-signed court documents." Encore Capital Group took the bigger hit, with $42 million in refunds and $10 million in fines, and the CFPB forced Encore to stop collecting on $125 million in debt. However, PRA Group will have to pay consumer refunds totaling $19 million, along with an $8 million penalty and an agreement to stop collecting on about $3 million in debt.

Yet despite the CFPB action, PRA Group seems committed to continue acquiring new debt-collection opportunities going forward. CEO Steve Fredrickson noted in last quarter's conference call that one reason why the U.S. debt-collection market has taken a hit lately is that several large sellers of debt have stayed out of the market, limiting the amount of supply available for PRA Group, Encore Capital Group, and their peers in the debt-collection space. Frederickson seems convinced that those debt-sellers will eventually return to the market, although he admitted that the timing of when they will do so isn't something he could predict with certainty.

In the PRA Group earnings report, investors need to keep a close eye on how successful strategic partnerships like its agreement with Brazilian master-servicing platform specialist RCB Investimentos have been in bolstering the company's overall results and extending its international reach. The strategic benefit of having exposure to different national economies is that to the extent that one country is at a different stage of the economic cycle than another, PRA Group can diversify its exposure and potentially enjoy good results in one area to help offset challenging conditions in other areas. If those efforts go well, and if the company can keep executing well in the rest of its business, then further growth opportunities could help PRA Group get its stock moving in the right direction once again.

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