A month has gone by since the last earnings report for Veeva Systems (VEEV - Free Report) . Shares have lost about 11.3% 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 its most recent earnings report in order to get a better handle on the important drivers.
Veeva Systems (VEEV - Free Report) Q3 Earnings Beat Estimates, Subscription Revenues High
Veeva Systems reported third-quarter fiscal 2019 adjusted earnings of 45 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. The bottom line also increased a whopping 80% on a year-over-year basis.
Total revenues came in at $224.7 million, outpacing the Zacks Consensus Estimate of $216.23 million. On a year-over-year basis, the top line improved 27%.
The company has a Zacks Rank #1 (Strong Buy).
Fiscal third-quarter subscription service revenues summed $178.2 million, up 25% year over year. On an adjusted basis, subscription gross margin came in at 84.8%, which expanded 320 basis points (bps).
Per management, solid momentum in bookings continued across all areas of Vault, which was 44% of subscription revenues compared with 36% a year ago.
Professional Service and Others
Professional Service revenues rose almost 35.9% to $46.5 million from the figure registered in the year-ago quarter. The segment’s gross margin in the quarter under review was 35%, which expanded 280 bps.
According to Veeva Systems, this improvement in revenues can be attributed to continued strong demand within Veeva Vault R&D (research and development). Management also remains optimistic about the segment’s impressive performance in the fiscal fourth quarter.
In the reported quarter, adjusted gross profit increased 31.2% to $167.4 million. Adjusted gross margin was 74.5%, which expanded 240 bps.
Adjusted operating income totaled $84.4 million, up 44.5% year over year. In the reported quarter, adjusted operating margin was 37.6%, which expanded 460 bps. Per management, the expansion was driven by impressive top-line performance.
However, adjusted operating expenses rose 20% year over year to $83 million. R&D expenses too shot up 17.4% year over year to $34.6 million.
For fourth-quarter fiscal 2019, Veeva Systems expects total revenues to be between $226 million and $227 million. The Zacks Consensus Estimate for the same is pegged at $ 222.1 million, below the guided range.
Adjusted earnings are expected to be 40 cents per share. The Zacks Consensus Estimate is pinned at 37 cents per share, below the projected figure. Adjusted operating income is expected in the $77-$78 million band.
Veeva Systems raised the guidance for fiscal 2019. Revenues are expected to be between $855.8 million and $856.8 million, up from the previously anticipated range of $840-$843 million. The Zacks Consensus Estimate for the same stands at 843.3 million, below the guided range.
For the fiscal year, adjusted earnings are anticipated to be $1.58 per share, up from the previous guidance of $1.47-$1.48. The Zacks Consensus Estimate for earnings is pegged at $1.48, below the projected figure.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 11.78% due to these changes.
Currently, Veeva has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Veeva has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.