VeriFone (PAY) Slides 10% on Bleak Revenue Guidance and Rising Competitors
VeriFone Systems (PAY: Charts, News), a San Jose, California-based company specializing in transaction automation systems for electronic payments, announced its third quarter earnings yesterday, which topped analyst expectations but fell short on guidance. VeriFone earned 34 cents per share, or $37.7 million, a vast improvement from the 3 cents per share, or $14.5 million, it posted in the second quarter, and a moderate gain from the 28 cents per share, or $26.4 million, it earned in the prior year quarter.
Excluding one-time charges, but including stock-based compensation, VeriFone actually earned 64 cents per share, beating the Street estimate of 61 cents. VeriFone's revenues rose 54.2% year-over-year to $489 million, a 3.6% improvement from the previous quarter, but missed the company's own forecast of $495 million to $500 million. Daily Chart
Looking forward, however, VeriFone cut its fourth quarter earnings and revenue guidance, slashing its EPS forecast to 75 to 77 cents per share, on revenue between $495 million to $500 million. Wall Street analysts had forecast earnings of 74 cents per share on revenue of $519 million. Management cited concerns regarding the euro against the U.S. dollar and other "safe haven" currencies. Although initially the guidance didn't look too bleak, the lowered revenue forecast, exacerbated by concerns about new competitors, such as Square, caused a massive selloff on Thursday, with shares crashing over 10% on above average volume. CEO Douglas Bergeron remained optimistic regarding its outlook and brushed off concerns regarding its competitors. "We have beachfront property for the mobile payment deployment," Bergeron stated on CNBC. VeriFone's technology, which connects consumers, merchants and financial institutions, is considered essential in an increasingly cashless society. Bergeron also noted that merchants will increasingly want an all-in-one e-commerce device that not only processes payments but is able to offer instant shopping interfaces. Bergeron also stressed his faith in VeriFone as a long-term growth investment. "I'm in for the long-haul; I just bought a bunch of shares a few months ago," he stated in regard his recent insider purchases. Earlier this month, VeriFone's rival Square signed a mobile payments deal with Starbucks SBUX, which caused VeriFone's stock to plunge over 10% on August 8. VeriFone is attempting to bundle other web-based services, such as cloud-based retail applications, along with its electronic transaction systems. During the third quarter, VeriFone's organic revenues grew 16% from the prior year quarter. Revenue in North America grew 9%. International revenues grew 21%, but Brazil remained a weak link, due to a jittery economy and unstable currency. In VeriFone's EMEA (Europe, Middle East and Africa) segment, the company's revenue soared 109% from the previous year. Latin America also posted strong 45% growth, despite weak demand in Brazil. Gross margin increased to 45%, from 43% the previous year, while operating margin grew from 19% to 23%. The company's cash flow of $82 million remains strong, as does its cash balance of $409.8 million. VeriFone also finished integrating its recent acquisition, Point, into its operations. Stockholm-based Point is notably one of Northern Europe's largest payment and gateway services providers, and will help VeriFone expand into 11 Northern European countries with a network of over 475,000 merchants. Shares of VeriFone currently trade at 9.7 times forward earnings with a 5-year PEG ratio of 0.51. The stock does not pay a dividend, and has traded in a wide 52-week range between $30.10 and $55.89. Other News About PAY VeriFone Beats, Slashes Guidance
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Published on Sep 7, 2012
By Leo Sun