Why Is Veeva (VEEV) Up 7.6% Since Last Earnings Report?
A month has gone by since the last earnings report for Veeva Systems (VEEV). Shares have added about 7.6% 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 drivers.
Veeva Systems Beats on Q3 Earnings, Revises FY24 Outlook
Veeva Systems reported adjusted earnings per share of $1.34 in the third quarter of fiscal 2024, reflecting an uptick of 18.6% from the year-ago earnings per share of $1.13. Adjusted earnings per share surpassed the Zacks Consensus Estimate by 4.7%.
GAAP earnings per share in the fiscal third quarter was 83 cents, up 23.9% from the year-ago period’s 67 cents.
Revenues
For the quarter, the company’s revenues totaled $616.5 million, outpacing the Zacks Consensus Estimate by 0.1%. On a year-over-year basis, the top line improved by 11.6%.
The fiscal third quarter top line was driven by Veeva Systems’ robust segmental performances.
Segmental Details
Veeva Systems derives revenues from two operating segments — Subscription services; and Professional services and other.
In the fiscal third quarter, Subscription services revenues improved 12.1% from the year-ago quarter to $494.9 million.
Professional services and other revenues were up 9.8% year over year to $121.6 million, primarily resulting from continued strength in R&D Solutions services and Veeva Business Consulting.
Margin Details
In the quarter under review, Veeva Systems’ gross profit improved 12.6% to $448.8 million. The gross margin expanded 67 basis points (bps) to 72.8%.
Sales and marketing expenses rose 3% to $96.8 million. R&D expenses went up 23.8% year over year to $161.3 million, while general and administrative expenses climbed 17.8% year over year to $62.3 million. Total operating expenses of $320.3 million increased 15.6% year over year.
Operating profit totaled $128.5 million, which increased 5.8% from the prior-year quarter. However, the operating margin in the fiscal third quarter contracted 114 bps to 20.8%.
Financial Position
The company exited third-quarter fiscal 2024 with cash and cash equivalents and short-term investments of $3.94 billion compared with $3.87 billion at the fiscal second-quarter end.
Cumulative net cash provided by operating activities at the end of third-quarter fiscal 2024 was $853.6 million compared with $717.1 million in the year-ago period.
Guidance
Veeva Systems has revised its financial outlook for fiscal 2024 and provided its estimates for the fourth quarter of fiscal 2024.
For the fourth quarter of fiscal 2024, the company expects total revenues between $620 million and $622 million. The Zacks Consensus Estimate is currently pegged at $623 million.
Subscription revenues and Professional services and other revenues are estimated to be approximately $517 million and $103 million-$105 million, respectively, in the fiscal fourth quarter.
Adjusted earnings per share is projected to be $1.30. The Zacks Consensus Estimate is pegged at $1.26.
Veeva Systems now expects revenues for fiscal 2024 between $2,353 million and $2,355 million, lowered from the earlier outlook of $2,365 million and $2,370 million. The Zacks Consensus Estimate is currently pegged at $2.36 billion.
Subscription revenues are now expected to be $1,897 million, reflecting an uptick from the earlier projection of $1.895 million. This consists of Commercial Solutions’ subscription revenues of around $993 million (up from the prior projection of $985 million) and R&D Solutions’ subscription revenues of approximately $904 million (down from the prior projection of $910 million).
Professional services and other revenues for fiscal 2024 are now expected to be between $456 million and 458 million, lowered from the earlier outlook of $470 million and $475 million.
Adjusted earnings per share for the year is now expected to be $4.76, indicating an increase from the previous outlook of $4.68. The Zacks Consensus Estimate is pegged at $4.68.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.94% due to these changes.
VGM Scores
Currently, Veeva has a nice Growth Score of B, a grade with the same score on the momentum front. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Veeva has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Veeva belongs to the Zacks Internet - Software industry. Another stock from the same industry, CrowdStrike Holdings (CRWD), has gained 2.3% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
CrowdStrike reported revenues of $786.01 million in the last reported quarter, representing a year-over-year change of +35.3%. EPS of $0.82 for the same period compares with $0.40 a year ago.
CrowdStrike is expected to post earnings of $0.82 per share for the current quarter, representing a year-over-year change of +74.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +2.2%.
CrowdStrike has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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