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Can Segmental Growth Fuel Veeva Systems' (VEEV) Q4 Earnings?

Zacks Equity Research

Veeva Systems Inc.’s VEEV fourth-quarter fiscal 2019 earnings are scheduled to release on Feb 26, after market close.

While the results are likely to reflect growth in the core Subscription Services segment, solid show by other segments is also expected to boost earnings.

Fiscal Q3 at a Glance

In the last reported quarter, Veeva Systems reported adjusted earnings of 45 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Adjusted earnings 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%.

Notably, Veeva Systems has a positive average earnings surprise of 13.2% for the trailing four quarters.

Which Way Are Q4 Estimates Headed?

For the quarter to be reported, the Zacks Consensus Estimate for revenues is pegged at $227.5 million, reflecting year-over-year growth of 23.1%. The same for earnings is pinned at 40 cents, showing year-over-year growth of 73.9%.

Veeva Systems Inc. Price and EPS Surprise

 

Veeva Systems Inc. Price and EPS Surprise | Veeva Systems Inc. Quote

Let’s delve deeper.

Subscription Services to Drive Growth

The Subscription services segment is a significant contributor to Veeva Systems’ revenues, accounting for 79.3% of net revenues in the last reported quarter.

Veeva Systems’ focus on cloud-based services has been consistently driving its top line. In recent times, the California-based company announced that its next-generation cloud single clinical data management application, Veeva Vault CDMS, eliminates the need for multiple tools and helps streamline clinical data. (Read More: Veeva's Vault CDMS to Unify Clinical Data in Single Platform)

Additionally, the flagship Veeva Vault has seen continued adoption by medical device and diagnostics companies. (Read More: Veeva Gains as MD&D Companies Pick Its Cloud-Based Services)

Additionally, last October, the company introduced an application for clinical research centers — Veeva Vault SiteDocs. Read More: (Veeva Launches Vault SiteDocs for Regulatory Documentation)

It is encouraging to note that for the fiscal fourth quarter, the Zacks Consensus Estimate for Veeva Systems’ Subscription Services stands at $186 million, up 23.2% year over year.

Other Factors at Play

Professional Services Likely to Boost Q4 Results

Veeva Systems’ core Professional Services unit is likely to see solid results for the quarter to be reported. Notably, the segment accounted for 20.7% of net revenues in the last reported quarter.

For the quarter to be reported, the Zacks Consensus Estimate for Professional Services revenues stands at $41.5 million, showing a year-over-year rise of 21.9%.

View Mixed

For the fiscal fourth quarter, Veeva Systems expects total revenues between $226 million and $227 million. The guided range lies below Zacks Consensus Estimate.

Fourth-quarter adjusted earnings are expected at 40 cents per share, in line with the Zacks Consensus Estimate.

Veeva Systems raised the guidance for fiscal 2019.

Revenues are expected between $855.8 million and $856.8 million, up from the previously anticipated $840-$843 million. The Zacks Consensus Estimate for the same stands at $857.3 million, above the guided range.

For the fiscal year, adjusted earnings are anticipated at $1.58 per share, up from the previous guidance of $1.47-$1.48. The projected figure is in line with the Zacks Consensus Estimate.

What Does Our Model Say?

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise. However, that is not the case here.

Earnings ESP: Veeva Systems has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Veeva Systems carries a Zacks Rank #3.

Please note that we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revision.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Masimo Corporation MASI has an Earnings ESP of +1.04% and a Zacks Rank #2.

Agree Realty Corporation ADC has an Earnings ESP of +0.20% and a Zacks Rank #3.

Adamas Pharmaceuticals, Inc. ADMS has an Earnings ESP of +10.29% and a Zacks Rank #3.

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