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Why Is Veeva (VEEV) Down 0.9% Since Last Earnings Report?

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A month has gone by since the last earnings report for Veeva Systems (VEEV - Free Report) . Shares have lost about 0.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Veeva due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Veeva Systems Q3 Earnings Beat Estimates, '22 View Up

Veeva Systems reported adjusted earnings per share of 97 cents in the third quarter of fiscal 2022, reflecting an improvement of 24.4% from the year-ago earnings per share of 78 cents. Adjusted earnings per share surpassed the Zacks Consensus Estimate by 10.2%.

GAAP earnings per share in the fiscal third quarter was 65 cents, up by 8.3% from the year-ago earnings per share of 60 cents.

Revenues

For the quarter, the company’s revenues totaled $476.1 million, outpacing the Zacks Consensus Estimate by 2.3%. On a year-over-year basis, the top line improved 26.1%.

The third-quarter top line was driven by Veeva Systems’ robust segmental performances.

Segmental Details

Veeva Systems derives revenues from two operating segments — Subscription services, and Professional services and other.

In the fiscal third quarter, Subscription services revenues improved 25.7% from the year-ago quarter to $380.7 million, primarily driven by the company’s more established products such as Vault QualityDocs, Vault eTMF and Vault Submissions.

Professional services and other revenues were up 27.9% year over year to $95.4 million, primarily resulting from continued strong demand for services related to Veeva Systems’ R&D solutions, increased demand from SMB customers and business consulting momentum.

Margin Details

In the quarter under review, Veeva Systems’ gross profit rose 26.2% to $346.5 million. Gross margin expanded 7 basis points (bps) to 72.8%.

Meanwhile, sales and marketing expenses rose 24.9% to $72.4 million. R&D expenses went up 23.3% year over year to $98.6 million, while general and administrative expenses climbed 21.4% year over year to $42.8 million. Total operating expenses of $213.8 million increased 23.5% year over year.

Operating profit totaled $132.7 million, which surged 30.9% from the prior-year quarter. Operating margin in the third quarter expanded 104 bps to 27.9%.

Financial Position

The company exited the fiscal 2022 third quarter with cash and cash equivalents, and short-term investments of $2.35 billion compared with $2.26 billion at the end of fiscal 2022 second quarter.

Cumulative net cash provided by operating activities at the end of the third quarter of fiscal 2022 was $710.4 million compared with $482.9 million in the year-ago period.

Guidance

Veeva Systems has provided its financial outlook for fiscal 2022 fourth quarter and upped its estimates for the full year. It has also initiated its fiscal 2023 financial projections.

For the fourth quarter of fiscal 2022, the company expects total revenues in the range of $478-$480million. The Zacks Consensus Estimate for the same is currently pegged at $479.9 million.

Subscription revenues are estimated to be approximately $394 million in the fiscal fourth quarter.

Adjusted earnings per share is projected to be 88 cents. The Zacks Consensus Estimate for the metric is pegged at 85 cents.

For fiscal 2022, revenues are expected in the range of $1,843 million-$1,845 million (up from the previously issued guidance range of $1,830 million-$1,835 million). The Zacks Consensus Estimate for the same is currently pegged at $1.83 billion.

Subscription revenues are estimated to be approximately $1.482 billion in the fiscal year.

Adjusted earnings per share for the year is expected to be $3.69, up from the previously provided estimate of $3.57, which is in line with the Zacks Consensus Estimate.

Veeva Systems expects its revenues for fiscal year 2023 to be in the range of $2,150 million-$2,170 million. The Zacks Consensus Estimate for the same is currently pegged at $2.18 billion.

Subscription services revenues are projected to lie between $1,735 million-$1,745 million for fiscal 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Veeva has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Veeva has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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