Why is Veeva Systems (VEEV) Up 8.3% Since Its Last Earnings Report?

It has been about a month since the last earnings report for Veeva Systems Inc. VEEV. Shares have added about 8.3% 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 drivers.

Recent Earnings

Veeva Systems reported first-quarter fiscal 2019 adjusted earnings of 33 cents per share. The bottom line beat the Zacks Consensus Estimate by 3 cents and improved 43.5% from the year-ago quarter.

 

Total revenues were $195.5 million in the first quarter, up 22.4% year over year. Moreover, the top line surpassed the Zacks Consensus Estimate of $189.2 million. Veeva Systems’ strong growth in Subscription revenues drove the metric.

 

Segmental Details

 

First-quarter subscription service revenues were $156 million, up 20.8% year over year. The upside was backed by stronger-than-expected bookings in the quarter under review.

 

Subscription gross margin was 80.8%, up roughly 100 basis points (bps) year over year. Per the company, momentum in product lines, especially Veeva Vault, continues to drive growth.

 

Professional service revenues rose almost 29.1% to $34 million. In the quarter under review, services gross margin was 23.5%, down 220 bps in the prior-year quarter.

 

Margin Details

 

Gross profit in the reported quarter increased 22.1% year over year to $135.4 million. Gross margin at Veeva Systems contracted 20 bps to 69.2% in the reported quarter.

 

Operating income was $44 million in the reported quarter, up 13.1% from average. However, operating margin contracted 180 bps to 22.5% from the year-ago quarter. Rising operating expenses kept the operating margin under pressure in the quarter. In this regard, operating expenses increased 26.9% in the reported quarter to $91.4 million.

 

Research and development expenses increased 31.4% to $37.2 million. Sales and marketing expenses rose 14.1% to $34.4 million. General and administrative expenses rose46.2% to $19.9 million.

 

Guidance

 

The company provided financial guidance for the second quarter of fiscal 2019. Total revenues are projected in the range of $203-$204 million.

 

Adjusted operating income is expected between $64 million and $65 million. Adjusted earnings per share are estimated in the band of 33-34 cents.

 

For the fiscal, total revenues are anticipated in the band of $826-$830 million, up from the previous range of $815-$820 million.

 

Adjusted earnings are projected between $1.36 and $1.38, up from the previous range of $1.30-$1.33.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been eight revisions higher for the current quarter.

Veeva Systems Inc. Price and Consensus

 

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

VGM Scores

At this time, VEEV has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. 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 C. 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 growth investors than momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, VEEV has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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