Raymond James Downgrades Pra Group To Outperform, Expects Significant Weakness In Stock Today

Shares of Pra Group Inc (NASDAQ: PRAA) plunged 20 percent after the debt collector's earnings missed consensus estimate by a wide margin, resulting in a Raymond James downgrade.

Raymond James downgraded the stock to Outperform from Strong Buy, saying the regulatory changes hurt the results. The company's non-GAAP EPS was $0.69 (versus. Raymond James estimate of $0.99 and consensus of $0.96).

"Our estimates depend on whether the legal collections delays are a 1 to 2 quarter event (as we expect) or become a more systemic issue. The overall health of the consumer seems on par with previous expectations, so the downside in the short-term hinges on adjustments to new regulatory rules," analyst Robert Dodd wrote in a note.

The company faced a drop in legal collections as consolidating law firms taking more time for increased paperwork and assurance given the late 2015 CFPB consent order with Hanna law firm.

"This headwind materially lowered US core collections in 1Q16 as cash collections were $20 million below our projection. We expect similar delays in 2Q, and could potentially see collections pick back up in 2H16 if current indications from law firms remain intact," Dodd highlighted.

The analyst cut his non-GAAP EPS estimate for the second quarter to $0.79 from $0.99 and 2016 to $3.12 from $3.85. Dodd also slashed the price target on the stock to $32 from $47.

At the time of writing, shares of Pra Group fell 19 percent to $24.95.