A provider of cloud-based software solutions, Veeva Systems Inc. VEEV, is set to report its first-quarter fiscal 2016 earnings results on May 28. Last quarter, the company had posted a 12.5% positive surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
Extended use of multi-channel Customer Relationship Management (CRM) product line by customers continues to be a key growth catalyst for the company. In Mar 2015, GlaxoSmithKline selected the company as its multi-channel Customer Relationship Management (CRM) partner.
In addition, a growing customer base will continue to drive subscription revenues, which soared 45.6% year over year to $66.5 million in the last reported quarter..
Along with the CRM platform, non-CRM products are also beginning to contribute to the company’s overall sales growth. Professional services revenues increased 19.6% to $20.5 million in the fourth quarter of fiscal 2015, primarily owing to strong adoption of non-CRM products. The company expects this trend to hold good in the fiscal first quarter as well.
Veeva forecasts subscription revenue growth of over 30% for fiscal 2016. The company expects subscription revenues from the CRM product line to grow roughly 20% in the fiscal, while subscription revenues from non-CRM products are likely to increase over two-folds from fiscal 2015.
We believe Veeva vault – the company’s cloud-based content management solution – holds substantial long-term prospects. In Dec 2014, Veeva opened two new European data centers in Germany and the U.K. The data centers are expected to support European and global customers’ needs for all of the company’s cloud-based solutions such as Veeva CRM, Veeva Network and Veeva Vault. Revenue from international market, as a result, is expected to increase.
In terms of its business outlook, Veeva Systems expects total revenue in the range of $87–$88 million for the first quarter of fiscal 2016. Non-GAAP operating income is expected between $23 million and $24 million. Non-GAAP earnings per share is projected at 10 cents.
Earnings Whispers
Our proven model does not conclusively show that Veeva Systems is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Veeva Systems has a Zacks ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 8 cents.
Zacks Rank: Veeva Systems has a Zacks Rank #3 which increases the predictive power of ESP. However, a 0.00% ESP makes surprise prediction difficult.
Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Orbital ATK, Inc. OA has an earnings ESP of +3.64% and a Zacks Rank #1.
Ciena Corporation CIEN has an earnings ESP of +21.43% and a Zacks Rank #1.
Casey's General Stores, Inc. CASY has an earnings ESP of +14.29% and a Zacks Rank #1.
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