Veeva Systems Inc. VEEV is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism, led by a solid third-quarter fiscal 2025 performance and strategic deals, is expected to contribute further. Compliance challenges and rising operational costs persist.
This Zacks Rank #3 (Hold) company’s shares have risen 17.8% in the past six months compared with 16.7% growth of the industry. The S&P 500 Composite has increased 12.5% during the said time frame.
The renowned provider of cloud-based software applications and data solutions for the life sciences industry has a market capitalization of $36.27 billion. The company projects 26.2% growth for the next five years and expects to maintain its strong performance in the future. It delivered a trailing four-quarter average earnings surprise of 6.92%.
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Reasons Favoring VEEV’s Growth
Robust Product Portfolio: We are optimistic about Veeva Systems’ unique solutions, which include Veeva Vault, Veeva CRM (customer relationship management), Veeva Network and Veeva OpenData.
Veeva Systems continues to expand its product portfolio with new launches. In December, the company announced the latest release of Vault CRM Suite. Vault CRM Campaign Manager is also now available as part of Vault CRM Suite, which is likely to help companies realize the vision of connected sales, marketing, and medical for streamlined, customer-centric engagement.
In November, Veeva Systems unveiled Vault CRM Bot and Vault CRM Voice Control, the two new Generative Artificial Intelligence capabilities in Vault CRM that are likely to be introduced this year. Veeva Systems also added 13 new Vault CRM customers in the fiscal third quarter. In September, VEEV commented on the release of Veeva Site Connect, which is part of the Veeva Clinical Platform.
Strategic Deals: We are upbeat about Veeva Systems’ recent few collaborations. Recently, VEEV and Zifo partnered to modernize biopharma quality control (QC) operations. By integrating Veeva LIMS with Zifo's qcKen platform, companies can streamline data import and master data configuration, simplifying LIMS implementation and transitioning from legacy QC systems.
In November, VEEV announced that Boehringer Ingelheim is set to commit to moving to Veeva Vault CRM. Boehringer Ingelheim seeks to expand on its existing Veeva Commercial Cloud solutions and One Medicine and Amplify platforms, which connect development processes and data on Veeva Development Cloud.
In October, Veeva Systems and Walgreens Boots Alliance announced a long-term strategic partnership to help life sciences companies improve patient outcomes. Through this collaboration, Walgreens will likely use Veeva Systems’ Data Cloud and Clinical Platform to connect its extensive network of community locations with diverse patient populations, aiming to simplify access to clinical research.
Strong Q3 Results: Veeva Systems exited the third quarter of fiscal 2025 with better-than-expected results. The uptick in the overall top line and bottom line and robust performance by the Subscription services segment during the quarter were impressive. Per management, more than 30 customers are now live on Vault CRM, and the seven migrations from Veeva CRM to Vault CRM are on track for completion by year-end.
In the fiscal third quarter, Veeva Systems’ gross profit improved 16.9% year over year to $524.8 million. The gross margin expanded 230 basis points (bps) to 75.1%. The operating margin in the fiscal third quarter expanded by a huge 510 bps to 25.9%.
Factors That May Offset the Gains of VEEV
Compliance Challenges: Furthermore, compliance is a very important factor in the highly regulated life sciences industry. In recent times, regulations have become increasingly difficult for global companies. These standards are constantly evolving, making compliance even more challenging. We believe that unfavorable regulatory tidings in the life sciences industry might mar Veeva System’s growth trajectory in the long haul.
Rising Costs: Veeva Systems has been experiencing rising operating costs over the past few months. Sales and marketing expenses for the third quarter of fiscal 2025 increased 1.9% year over year. Management expects sales and marketing expenses to increase in fiscal 2025, primarily due to employee-related expenses as the company raises its headcount to support its sales and marketing efforts associated with its product offerings and continued expansion of its sales capacity across all its solutions.
In the fiscal third quarter, the total operating expenses increased 7.2% year over year. Veeva Systems expects operating expenses to increase in fiscal 2025, primarily due to employee compensation-related costs.
Estimate Trend
Veeva Systems is witnessing a positive estimate revision trend for fiscal 2025. In the past 60 days, the Zacks Consensus Estimate for fiscal 2025 earnings per share (EPS) has moved 22 cents north to $6.45.
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $698.3 million, indicating a 10.7% improvement from the year-ago quarter’s reported number. The EPS estimate for the fourth quarter of fiscal 2025 is pinned at $1.58, implying a 14.5% improvement year over year.
Key Picks
Some better-ranked stocks in the broader medical space are Cardinal Health, Inc. CAH, ResMed Inc. RMD and DaVita Inc. DVA.
Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.5%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health’s shares have gained 21.7% compared with the industry’s 6.1% growth in the past year.
ResMed, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.8%. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average being 6.4%.
ResMed has gained 32.4% compared with the industry’s 16.5% growth in the past year.
DaVita, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 18.3%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 10.6%.
DaVita’s shares have rallied 59.3% compared with the industry’s 16.1% growth in the past year.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
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Today, See These 5 Potential Home Runs >>DaVita Inc. (DVA) : Free Stock Analysis Report
Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
ResMed Inc. (RMD) : Free Stock Analysis Report
Veeva Systems Inc. (VEEV) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
