Veeva Systems (VEEV) Up 17.3% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Veeva Systems Inc. VEEV. Shares have added about 17.3% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is VEEV due for a pullback? 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 catalysts.

Recent Earnings

Veeva reported fourth-quarter fiscal 2018 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 figure.

Full-year adjusted EPS came in at 93 cents, a 27.4% rally from the year-ago period. It also exceeded the Zacks Consensus estimate by 2.2%.

Total revenues were $184.9 million in the fourth quarter, reflecting an increase of 23.1% year over year. Moreover, the top line was ahead of the Zacks Consensus Estimate of $180 million. Veeva System’s strong growth in subscription revenues segment drove the metric.

Segmental Details

Fourth-quarter 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. Subscription gross margin was 81%, reflecting contraction of roughly 25 basis points from the sequentially last quarter. Per the company, the year-over-year deterioration was due to duplicate expense associated with the company’s AWS migration.

Professional service revenues rose almost 10.7% to $34 million. In the quarter under review, services gross margin was 21%, down from 32% in the sequentially last quarter.

Margin Details

Gross margin at Veeva Systems contracted 91 basis points (bps) to 69% in the reported quarter. Operating income was $34.9 million, representing a 7.2% gain from the year-ago quarter.

Operating margin contracted 280 bps to 18.9% from the year-ago figure. Research and development expenses increased 41.8% to $37 million. Sales and marketing expenses rose 13.5% to $37.2 million and general and administrative expenses increased 37.7% to $16.8 million.

Balance Sheet

Veeva Systems ended the fiscal with nearly $761.9 million in cash and short-term investments compared with $518.9 million at the end of fiscal 2017.GuidanceThe company has provided financial guidance for fiscal 2019 ending Jan 31, 2019.

For the fiscal, total revenues are anticipated in the band of $815-$820 million. Adjusted earnings are projected between $1.30 and $1.33 per share.

For first-quarter fiscal 2019, Veeva Systems expects total revenues in the range of $188-$189 million. Meanwhile, adjusted earnings are estimated between 30 cents and 31 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 30.8% due to these changes.

Veeva Systems Inc. Price and Consensus

Veeva Systems Inc. Price and Consensus | Veeva Systems Inc. Quote

VGM Scores

At this time, VEEV has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth 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.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise VEEV has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

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