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Veeva (VEEV) Up 16.1% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Veeva Systems (VEEV). Shares have added about 16.1% in that time frame, outperforming the S&P 500.

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

Veeva Systems Q2 Earnings and Revenues Beat

Veeva Systems reported second-quarter fiscal 2019 adjusted earnings of 39 cents per share, which surpassed the Zacks Consensus Estimate by 14.7%. The bottom line also increased a whopping 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%.

Segmental Details

Fiscal second-quarter subscription service revenues summed $169.6 million, up 25.1% year over year. Subscription gross margin was 83.6%, which expanded 220 basis points (bps).

Per management, strong momentum in bookings continued across all areas of Vault, which was 42% of subscription revenues compared with 36% a year ago.

Professional service revenues rose almost 24.1% year over year to $40 million. The segment’s gross margin in the quarter under review was 31.5%, which contracted 190 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 third quarter.

Margin Details

In the reported quarter, adjusted gross profit increased 27.5% to $154.4 million. Adjusted gross margin was 73.7%, which expanded 150 bps.

Adjusted operating income totaled $74.3 million, up 39% year over year. Notably, adjusted operating margin in the second quarter was 35.5%, which expanded 360 bps as well. Per management, the expansion was driven by top-line outperformance.

However, adjusted operating expenses rose 18.5% year over year to $80.1 million. R&D expenses also shot up 16.7% year over year to $33.2 million.

Guidance

For third-quarter fiscal 2019, Veeva Systems expects total revenues between $215 million and $216 million.

Adjusted earnings per share are expected at 38 cents.

For fiscal 2019, revenues are expected between $840 million and $843 million.

djusted earnings per share for fiscal 2019 are anticipated between $1.47 and $1.48.

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months. The consensus estimate has shifted 10.93% due to these changes.

VGM Scores

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 bottom 20% quintile 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.

Outlook

Veeva 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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