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What's in Store for Veeva Systems (VEEV) in Q1 Earnings?

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Veeva Systems Inc. (VEEV - Free Report) first-quarter fiscal 2019 earnings are scheduled to release on May 24. Growing demand for cloud-based and vault applications, new product launches, industry-focused approach and international expansion are expected to drive the company’s top line. While, the results are likely to reflect growth in the core Subscription Services segment, other initiatives may also drive earnings.

Notably, Veeva Systems pulled off a positive average earnings surprise of 15.1% in the trailing four quarters. In the last reported quarter, Veeva Systems delivered adjusted earnings of 23 cents per share. The bottom line beat the Zacks Consensus Estimate by a couple of cents and improved 4.5% from the year-ago quarter’s figure. Total revenues were $184.9 million in the quarter, up 23.1% year over year. Moreover, the top line beat the Zacks Consensus Estimate of $180 million. Strong growth in subscription revenues segment drove the metric.

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $5189.2 million, reflecting year-over-year growth of 19.8%. The same for earnings is pinned at 30 cents, showing year-over-year growth of 36.4%.

Let’s delve deeper.

Veeva Systems Inc. Price and EPS Surprise

 

Subscription Services to Drive Growth

The Subscription services segment is a significant contributor of Veeva Systems’ revenues, accounting for 81.6% of net revenues in the last reported quarter.

Recently, the company strengthened the recurring part of its revenue mix with significant growth in subscription revenues. Moreover, launches of the Veeva Vault and the Veeva Commercial Cloud platforms are encouraging. The company thrives on considerable strength in its CRM platform.

The Zacks Consensus Estimate for Subscription services revenues is pegged at $156 million, reflecting sequential growth of 22.8%. The figure reflects an increase of 23.3% year over year.

The company’s subscription revenue growth estimate of at least 20% through fiscals 2019 and 2020 buoy optimism. In fact, the flagship Vault platform is expected to drive Subscription revenues. In the last quarter, Veeva’s Vault content management products added a record number of new customers. In the fourth quarter of 2017, subscription service revenues were $150.9 million, up 26.2% year over year. This upside was backed by stronger-than-expected bookings in the quarter.

Other Factors at Play

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For the quarter to be reported, Veeva Systems expects total revenues between $188 and $189 million. Adjusted operating income is expected in the range of $58-$59 million. Adjusted earnings are expected in the range of 30-31 cents.

Veeva Systems provided fiscal 2019 outlook, where total revenues are estimated in the band of $815-$820 million. Adjusted operating income is expected between $250 and $255 million. Adjusted earnings per share is projected between $1.30 and $1.33. Meanwhile, the Zacks Consensus Estimate for fiscal 2019 revenues is pegged at $819.2 million, which falls within the provided range. The Zacks Consensus Estimate for fiscal 2019 earnings is projected at $1.32, which also falls within the given range.

Professional Services Drive Growth

Professional Services unit is also likely to drive the quarterly results. In the last reported quarter, professional service revenues rose almost 10.7% to $34 million.

The Zacks Consensus Estimate for Professional services revenues is pegged at $33.1 million for the first quarter, reflecting an improvement of 7.9% year over year. In fact, professional services have been growing in the mid-to-high teens for the last three years. In the coming quarters, management expects mid-to-high single-digits growth in the segment.

Veeva Systems’ commercial excellence through integrated master data, compliant commercial content, multichannel CRM and collaboration between sponsors, CROs and sites provides it a competitive edge in the MedTech space.

Industry Specific Focus

Veeva Systems’ industry specific focus gives it a significant leverage, in our view. The company’s knowledge base about the different components of the life sciences industry is helping it to build targeted products. Products like Veeva OpenData provides customer data for all healthcare professionals (HCP), healthcare organizations (HCO) and affiliations across life sciences’ major markets.

What Does our Model Predict?

Our quantitative model does not show a beat for Veeva Systems this earnings season. This is because a stock needs to have a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates.

Earnings ESP: The Earnings ESP for Veeva Systems is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Veeva Systems carries a Zacks Rank #3.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Brady Corporation (BRC - Free Report) has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Quality Systems has an Earnings ESP of +5.00% and a Zacks Rank #3.

Medtronic (MDT - Free Report) has an Earnings ESP of +0.09% and a Zacks Rank #3.

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