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Can Segmental Growth Boost Veeva Systems' (VEEV) Q3 Earnings?

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Veeva Systems Inc.’s (VEEV - Free Report) third-quarter fiscal 2019 earnings are scheduled to release on Nov 28, after market close.

While the results are likely to reflect growth in the core Subscription Services segment, solid show by other segments is also expected to boost earnings.

Fiscal Q2 at a Glance

In the last reported quarter, Veeva Systems reported adjusted earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 14.7%. The bottom line also increased 62.5% on a year-over-year basis.

Total revenues came in at $209.6 million, outpacing the Zacks Consensus Estimate of $203.7 million. On a year-over-year basis, the top line climbed 24.9%.

Notably, Veeva Systems pulled off a positive average earnings surprise of 12% in the trailing four quarters.

Which Way Are Estimates Headed?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $216.2 million, reflecting year-over-year growth of 22.8%. The same for earnings is pinned at 38 cents, showing year-over-year growth of 52%.

Veeva Systems Inc. Price and EPS Surprise

 

Veeva Systems Inc. Price and EPS Surprise | Veeva Systems Inc. Quote

Let’s delve deeper.

Subscription Services to Drive Growth

The Subscription services segment is a significant contributor to Veeva Systems’ revenues, accounting for 80.9% of net revenues in the last reported quarter.

Veeva Systems’ focus on cloud-based services has been consistently driving its top line. In recent times, the California-based company announced that its next-generation cloud single clinical data management application, Veeva Vault CDMS, eliminates the need for multiple tools and helps streamline clinical data. (Read More: Veeva's Vault CDMS to Unify Clinical Data in Single Platform)

Additionally, the flagship Veeva Vault has seen continued adoption by medical device and diagnostics (MD&D) companies. (Read More: Veeva Gains as MD&D Companies Pick Its Cloud-Based Services)

It is encouraging to note that for the fiscal third quarter, the Zacks Consensus Estimate for Veeva Systems’ Subscription Services stands at $176 million, up 23.9% year over year.

Other Factors at Play

Veeva Systems’ Professional Services unit is likely to see solid results for the quarter to be reported. Notably, the segment accounted for 19.1% of net revenues in the last reported quarter.

For the quarter to be reported, the Zacks Consensus Estimate for Professional Services revenues stands at $40.6 million, showing a year-over-year rise of 18.7%. In fact, management remains optimistic about the segment’s impressive performance in the fiscal third quarter owing to continued strong demand within Veeva Vault R&D (research and development).

However, Veeva Systems expects its fiscal third quarter revenues to be within $215 million and $216 million, slightly lower than the Zacks Consensus Estimate. The company expects earnings per share to be 38 cents for the quarter to be reported, in line with the Zacks Consensus Estimate.

Additionally, Veeva Systems faces significant competition across most of its product lines. The competitors include the likes of Oracle Corporation (ORCL - Free Report) , Cegedim SA and IMS Health Holding. We believe that intensifying competition will impact the company’s market share.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the quarter. However, this is not the case here.

Earnings ESP: Veeva Systems has an Earnings ESP of 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 #2.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

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.

The Cooper Companies (COO - Free Report) has an Earnings ESP of +2.26% and a Zacks Rank #3.

Burlington Stores, Inc. (BURL - Free Report) has an Earnings ESP of +2.95% and a Zacks Rank #2.

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