Veeva Systems Earnings Beat Expectations. Why the Stock Is On Pace for Its Largest Drop Since 2023.

Veeva Systems boosted its fiscal-year earnings and revenue guidance on the back of a strong third quarter. (DREAMSTIME)

Key Points

• Veeva Systems declined after revealing it secured only 14 of the top 20 biopharmaceutical companies as Vault CRM customers.
• The company raises its fiscal-year adjusted earnings outlook to approximately $7.93 a share and revenue guidance to $3.17 billion.
• Veeva’s fiscal third-quarter adjusted earnings of $2.04 a share on revenue of $811.2 million exceed analysts’ expectations.

Veeva Systems raised its full-year outlook for the third quarter in a row but shares were sliding Friday as one detail from the earnings call overshadowed the software company’s quarterly results.

Shares slumped more than 10% after Veeva said it expected to end up with just 14 of the largest 20 biopharmaceutical companies as Vault CRM customers, versus previous higher expectations, with rival Salesforce securing the other six.

Veeva broke off its partnership with Salesforce in 2022 and released Vault CRM, its customer relationship management platform, two years later to replace software it had built using Salesforce technology. Mizuho analysts remarked Friday that this “win-loss ratio” likely would overshadow an encouraging fiscal-year guidance increase.

Veeva said it now expects fiscal-year adjusted earnings of roughly $7.93 a share, up from $7.78 and above the $7.90 Wall Street had forecast. The company also guided for $3.17 billion in revenue, versus a prior range of $3.13 billion to $3.14 billion. Analysts were looking for $3.16 billion.

Fiscal third-quarter earnings also broadly beat expectations. Veeva posted adjusted earnings of $2.04 a share for the period ended Oct. 31, surpassing the $1.95 analysts had anticipated, according to FactSet. Revenue was $811.2 million, topping calls for $792.8 million.

“While it was a solid quarter and F4Q guidance was essentially ‘in line,’ we expect that the investor debate will remain centered around Veeva’s competitive positioning on the commercial side of the business against Salesforce in the near term,” Evercore ISI analysts wrote Friday.

The consensus on Wall Street is generally upbeat, with 24 of the 34 analysts tracked by FactSet rating Veeva at Buy or the equivalent.

Some, like BNP Paribas analyst Andrew DeGasperi, see Friday’s dip as a meaningful buying opportunity. “With the CRM risk now finally addressed, we think investors can focus on the positives,” DeGasperi wrote. He noted that Veeva’s $6 billion top-line revenue target for 2030 was unchanged “despite the lower-than-expected CRM contribution.”

Friday’s declines put the stock on pace for its worst same-day percentage decrease since a 14% plunge on Nov. 9, 2023, according to Dow Jones Market Data. Shares have risen 15% this year, outstripping an 11% gain for the benchmark S&P 500.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com