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Medidata (MDSO) Down 1.9% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Medidata Solutions (MDSO - Free Report) . Shares have lost about 1.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Medidata 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.

Medidata Q1 Earnings Beat Estimates, Margins fall

Medidata Solutions, Inc. reported first-quarter 2019 adjusted earnings per share of 45 cents, which surpassed the Zacks Consensus Estimate by 28.6%. The bottom line increased 12.5% from the year-ago figure.

Revenues of $173.5 million rose 16% year over year. The figure also beat the Zacks Consensus Estimate by 0.9%.

Segment Details

Medidata reports through two major segments, Subscription and Professional Services. Subscription revenues in the first quarter were $146.9 million, up 16% on a year-over-year basis.

Revenues at Professional services grossed $26.6 million, up 19% from the prior-year quarter.

Margins

In the first quarter, gross profit was $127.5 million, up 12.9% year over year. Though the gross margin was an impressive 73.5%, it contracted 220 basis points (bps).

Operating income in the first quarter was $49.8 million, down 62.6% year over year. Operating margin in the quarter was 2.9%, marking a contraction of 600 bps.

Liquidity Position

The company exited the first quarter of 2019 with cash and cash equivalents of $109.1 million, up 3.4% from $105.4 million at the end of 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Medidata has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Medidata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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