Can Veeva Systems (VEEV) Pull A Surprise In Q1 Earnings?

Veeva Systems Inc. (NYSE:VEEV) is set to report first-quarter fiscal 2017 results on May 25. Last quarter, the company reported earnings of 15 cents, beating the Zacks Consensus Estimate of 11 cents. Veeva posted an average positive surprise of 39.00% over the last four quarters.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Veeva expects total revenue in the range of $151.0–$152.0 million for first-quarter fiscal 2018. Meanwhile, non-GAAP operating income is expected between $41.5 million and $42.5 million. Non-GAAP earnings are expected to be 18 cents per share.

Extended use of multi-channel Customer Relationship Management (CRM) application by customers continues to be a key growth catalyst for the company. We believe product suites like Veeva Vault will help the company gain customers. The Veeva Vault QMS is effective in spreading the product’s presence into new markets. The addition of QMS doubles Veeva System’s growth opportunities in the quality management market.

Additionally, the company’s regulatory application suite – Veeva Vault Registrations and Veeva Vault Submissions Archive – continues to gain solid traction, which is a key catalyst. It will be interesting to see if these positives translate into an earnings beat this time around.

A glimpse at the stock’s price performance over the past three months reveals a gain of almost 36.76%. The stock’s current return thus compares favorably with the Zacks categorized Internet Software sub-industry’s return of 8.03% over the same time frame.

Overall activities of Veeva Systems during the first quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the to-be-reported quarter fell to 12 cents from 15 cents per share in the last 90 days.

Earnings Whispers

Our proven model does not conclusively show that Veeva is likely to beat estimates this quarter. This is because a stock needs to have 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 an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 12 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Veeva carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some better-ranked companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat:

Best Buy Co. Inc. (NYSE:BBY) has an Earnings ESP of +12.50% and a Zacks Rank #3. On average, the stock delivered a positive surprise of almost 27.70% in the last four quarters.

Global Partners LP (NYSE:GLP) delivered a positive surprise of almost 96.55% in the trailing four quarters, and has an Earnings ESP of +233.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Raymond James Financial, Inc. (NYSE:RJF) has an Earnings ESP of +3.45% and a Zacks Rank #1. The stock came up with a positive surprise of almost 14.4% in the last four quarters.

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