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Why Is Medidata (MDSO) Up 3.4% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Medidata Solutions (MDSO). Shares have added about 3.4% in that time frame, outperforming the S&P 500.

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

Medidata Q4 Earnings Beat on Strong Subscription Revenues

Medidata reported fourth-quarter 2018 adjusted earnings per share of 45 cents, which surpassed the Zacks Consensus Estimate of 37 cents. However, earnings dropped a penny from the year-ago quarter.

Revenues of $167.2 million rose 18.1% year over year. However, the figure missed the Zacks Consensus Estimate by 0.3%.

Segment Details

Subscription revenues in the fourth quarter came in at $141.3 million, up 18% on a year-over-year basis.

Revenues at Professional services grossed $25.9 million, up 18.5% from the prior-year quarter, reflecting strength in platform implementations, partner enablement services and on-going support services.

Margins

In the fourth quarter, gross profit came in at $124.1 million, up 13.9% year over year. Though gross margin was an impressive 74.2%, it contracted 270 basis points (bps).

Adjusted operating income in the fourth quarter was $36.6 million, down 2.3% year over year. Adjusted operating margin in the quarter was 21.9%, down 450 bps.

Guidance

For 2019, the company expects revenues in the band of $734-$746 million, representing 16% growth at midpoint.

Subscription revenues are expected between $619 million and $631 million, representing 17% growth at midpoint. Meanwhile, revenues from professional services are projected at approximately $115 million.

Non-GAAP operating income is projected between $175 million and $183 million.

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

 

 

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

 

 

 

 

Note: The EPS data mentioned in the text of this section differs from the rest of report due to the difference in calculation or consideration of one-time items.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -38.78% due to these changes.

VGM Scores

Currently, Medidata has an average Growth Score of C, though it is lagging a bit on the Momentum Score front 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 D. 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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