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Medidata Solutions (MDSO) Rallies 10.4% on Solid Q1 Earnings

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Shares of Medidata Solutions, Inc. (MDSO - Free Report) have gained 10.4% since the release of first-quarter 2018 results on Apr 19.

The rally was backed by better-than-expected earnings per share (EPS) and revenue growth across all segments. Over the past three months, the company has gained 18.3% significantly outperforming the industry’s return of 3.8%.

The Zacks Rank #3 (Hold) company reported adjusted EPS of 40 cents, which outpaced the Zacks Consensus Estimate by 14.3%. Earnings improved 25% from the prior-year quarter.

Quarter Highlights

Revenues in the first quarter grossed $149.2 million, up 16.9% from a year ago. Revenues beat the Zacks Consensus Estimate by 1.5%.

Management is optimistic about a broadening customer base owing to significant enterprise agreements signed in the first quarter.

Medidata Solutions, Inc. Price, Consensus and EPS Surprise

 

Medidata Solutions, Inc. Price, Consensus and EPS Surprise | Medidata Solutions, Inc. Quote

Segment Details

Subscription revenues came in at $126.8 million, up 17.5% on a year-over-year basis. Per management, total subscription backlog increased by $225 million or 28% on a year-over-year basis to more than $1 billion.

Revenues from Professional services grossed $22.4 million, up 13.3% from the prior-year quarter.

Margins

In the first quarter, gross profit came in at $112.9 million, up 16.4% year over year. Though gross margin was an impressive 89%, it contracted 90 basis points (bps).

Adjusted operating income totaled $34.2 million, up 23.7% on a year-over-year basis. Adjusted operating margin was 22.9%, up 120 bps.

Guidance

The company has retained the 2018 guidance.

Total revenues are expected between $624 million and $648 million, representing 17% year-over-year growth. Notably, the Zacks Consensus Estimate is pegged at $637.2 million, within the projected range.

Subscription revenues are anticipated between $531 million and $555 million, while Professional services are expected to garner approximately $93 million.

Non-GAAP operating income is expected within $157-$167 million, while non-GAAP net income is projected within $98.5-$106.5 million.

In Conclusion

Medidata wrapped up the first quarter of 2018 on a solid note. Strong growth recorded by the Subscription segment is a major positive. An improvement in operating margin buoys optimism. The company also rides on newly signed enterprise agreements in the quarter which are likely to broaden its customer base. Furthermore, Medidata is gaining momentum in areas like payments, eTMF, imaging and mHealth. The company’s coveted Rave Genomics platform is also seeing a slew of developments. In 2018, management foresees tremendous scope for research and development as well.

On the flip side, a declining gross margin raises concern. The company also faces stiff competition in the niche space.

Key Picks

A few better-ranked stocks which reported solid results this earnings season are Intuitive Surgical (ISRG - Free Report) , Abiomed, Inc. (ABMD - Free Report) and Varian Medical Systems (VAR - Free Report) . While Intuitive Surgical and Abiomed sport a Zacks Rank #1 (Strong Buy), Varian Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abiomed reported fourth-quarter fiscal 2018 earnings per share of 80 cents, which beat the Zacks Consensus Estimate by 25%. Revenues were $174.4 million, surpassing the consensus estimate by 6.3%.

Varian Medical reported second-quarter fiscal 2018 adjusted earnings per share of $1.15, which beat the Zacks Consensus Estimate of $1.06. Revenues totaled $729.9 million, which beat the consensus mark of $659.6 million.

Intuitive Surgical reported first-quarter 2018 adjusted earnings per share of $2.44, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the consensus mark by 10.6%.

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