Can Model N (MODN) Retain Its Beat Streak in Q3 Earnings?

Model N Inc.MODN is slated to release third-quarter fiscal 2018 results on Aug 7.

In the second quarter, Model N delivered adjusted earnings of 2 cents per share against the year-ago quarter's loss of 25 cents per share. The figure also compared favorably with the Zacks Consensus Estimate of a loss of 4 cents per share.

Model N surpassed the Zacks Consensus Estimate in the trailing four quarters with an average positive earnings surprise of 88.89%.

The company delivered second-quarter fiscal 2018 revenues of $39.2 million which surged 17.9% on a year-over-year basis and also beat the Zacks Consensus Estimate of $38 million. The figure also surpassed the guided range of $38-$38.5 million.

Notably, shares of Model N have gained 19.7% year to date, significantly outperforming the 15.5% rally of the industry it belongs to.

What to Expect?

Model N anticipates non-GAAP net loss in the range of 9-11 cents per share for the third quarter. The Zacks Consensus Estimate for the quarter is pegged at a loss of 9 cents per share, near the lower end of the guided range.

The company expects fiscal third-quarter 2018 GAAP revenues to come in the range of $39-$39.5 million. The Zacks Consensus Estimate is pegged at $39.3 million, in line with the guided range, reflecting year-over-year growth of 14.7%.

Factors Likely To Influence Q3 Results

The integration of Revitas, completed during fiscal 2017, has expanded Model N's product suite and customer base. It remains a key catalyst for the company enabling it to deliver greater value to its investors.

SaaS & Maintenance revenues of $32.9 million grew 21.1% year over year in the last reported quarter. Model N is accelerating its transition of revenue management to cloud and is on track to shift its business to a 100% SaaS and Maintenance revenue model. This move will bolster the top line, going forward.

Model N is undertaking considerable initiatives in its go to market strategy to boost growth. The company's Revenue Cloud offering for med-tech, pharma and high tech companies holds promise. The solution is gaining traction, for instance, AstraZeneca subscribed to Revenue Cloud for Pharma for their U.S. business recently.

Model N's Global Price Management solution was selected by Gedeon Richter, a notable global pharmaceutical company. The company has also aided Novartis, Swedish Orphan Biovitrum (Sobi), Takeda, and Sandoz, among other companies, to conclude implementation projects.

The company's Revenue Management platform aimed at enhancing digital reinvention experience bodes well. The company has also introduced Model N CPQ (Configure, Price and Quote), Model N Channel Cloud and Revenue Cloud for High Tech suites.

Additionally, Model N's growth prospects in the life sciences & high technology are bright due to increasing redundancy of legacy systems. The company's solutions provide higher Return on Investment ("ROI") as well as plug gaps in the end-to-end revenue management process that legacy systems fail to do.

These initiatives impact top-line growth of the company's clientele, consequently bolstering adoption of Model N's solutions going ahead. However, increasing expenditure to develop products is likely to hurt margins at least in the near term.

What Does the Zacks Model Unveil?

Our proven model shows that 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. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

The Sell-rated stocks (4 or 5) are best avoided, especially when the company is seeing negative estimate revisions.

Model N has a Zacks Rank #2 but an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Model N, Inc. Price, Consensus and EPS Surprise

Model N, Inc. Price, Consensus and EPS Surprise | Model N, Inc. Quote

Stocks with Favorable Combination

Here are a few stocks in the same sector worth considering as our model shows that these have the right combination of elements to deliver an earnings beat in the upcoming releases.

Vishay Intertechnology, Inc. VSH has an Earnings ESP of +2.41% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Infinera Corporation INFN has an Earnings ESP of +3.57% and a Zacks Rank #2.

CyberArk Software Ltd. CYBR has an Earnings ESP of +3.38% and a Zacks Rank #3.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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