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 second-quarter fiscal 2025 performance and continued spend on research and development, is expected to contribute further. However, rising operational costs remain a matter of concern.

This Zacks Rank #2 (Buy) company’s shares have gained 10.2% in the year-to-date period compared with 24.2% growth of the industry. The S&P 500 Composite has risen 21.9% 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 $34.37 billion. The company projects 24.4% 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 5.41%.

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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 and enhance its product portfolio with new launches and partnerships. In October, Walgreens and Veeva Systems announced a long-term partnership that is likely to enrich Veeva Data Cloud products and allow Walgreens to better serve life sciences through access to Veeva Data Cloud and Veeva Clinical Platform.

In September, Veeva announced the expansion of Veeva Vault QMS, adding new capabilities to manage medtech field actions and product recalls.In August, the company reached a significant milestone on its path to connect sales, marketing, medical, and service to enable true customer centricity with the release of Vault CRM Service Center.

Veeva Systems also added 14 new Vault CRM customers in the fiscal second quarter. The company also commented on the latest release of Veeva Site Connect, which is part of the Veeva Clinical Platform. Veeva Site Connect plays a critical role as the industry moves to simplify and standardize site collaboration, and seven of the top 20 biopharmas have already adopted Veeva Site Connect to streamline trials.

Also, in clinical, the Veeva Clinical Database, a significant innovation in clinical data, has been selected by seven top 20 biopharmas to reduce manual query work and increase speed and efficiency in trials.

Continued Spend on R&D: Veeva Systems’ R&D organization is responsible for the design, development and testing of its solutions and applications. Based on customer feedback and needs, the company develops new solutions, functionality, applications and core technologies. Further, it enhances the usability, functionality, reliability, performance and flexibility of existing solutions and applications.

R&D expenses for the second quarter of fiscal 2025 increased 12.2%, primarily due to increased employee compensation-related costs.

Strong Q2 Results: Veeva Systems’ solid second-quarter fiscal 2025 results buoy optimism. The uptick in the overall top and bottom lines and robust performance by the Subscription services segment during the quarter were impressive. In the fiscal second quarter, Veeva Systems’ gross profit improved 20.1% to $505.8 million. The gross margin expanded 340 basis points to 74.8%.

Factors That May Offset the Gains for VEEV

Escalating Costs: VEEV has been incurring huge operating expenses in recent months. Sales and marketing expenses for the second quarter of fiscal 2025 increased 4.7% year over year. Management anticipates a further increase in these expenses throughout fiscal 2025. This is mainly due to employee-related costs as the company expands its workforce to bolster sales and marketing efforts for its product offerings and to continue growing its sales capacity across all solutions. In the fiscal second quarter, the total operating expenses increased 6.9% year over year. 

Estimate Trend

Veeva Systems is witnessing a stable estimate revision trend for fiscal 2025. In the past 60 days, the Zacks Consensus Estimate for earnings has moved north to $6.23 per share.

The Zacks Consensus Estimate for third-quarter fiscal 2025 revenues is pegged at $683.7 million, indicating a 10.9% improvement from the year-ago quarter’s reported number.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Addus HomeCare ADUS,  Quest Diagnostics DGX  and RadNet RDNT . While Addus HomeCare sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and RadNet carry a Zacks Rank #2 each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Addus HomeCare has an estimated long-term growth rate of 12.1%. ADUS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 11.5%.

Addus HomeCare shares have rallied 85.5% compared with the industry's 16.9% growth year to date.

Quest Diagnostics has an estimated long-term growth rate of 6.8%. DGX's earnings surpassed estimates in each of the trailing four quarters, with the average being 3.3%.

Quest Diagnostics has gained 42% compared with the industry's 14.9% growth year to date.

RadNet’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 98.2%.

RDNT's shares have surged 93.7% year to date compared with the industry’s 14.8% growth.

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