On Mar 12, Zacks Investment Research downgraded
Green Dot Corporation
) to a Zacks Rank #5 (Strong Sell) on account of its weak
fourth-quarter 2013 results.
Why the Downgrade?
Green Dot witnessed downward estimate revisions following weak
fourth-quarter results reported on Jan 30, 2014. The results
clocked a substantial negative surprise of 56.3%. With this, the
company delivered negative earnings surprises in two of its last
four reported quarters with an average miss of 16.6%.
Moreover, shares of this life insurer lost nearly 20.7% since
the company reported disappointing fourth-quarter results. Given
its current quarter
of -3.9%, we feel the company is slated for difficult times going
Green Dot reported fourth-quarter net operating income per share
of 7 cents. Results plunged from the year-ago quarter earnings of
24 cents and also missed the Zacks Consensus Estimate of 16 cents
The underperformance by Green Dot was largely due to rising
expenses at the company. During the fourth quarter of 2013, total
expenses of Green Dot scaled up 15.5% year over year. The
increase came on the back of higher sales and marketing,
processing and other general and administrative expenses
Green Dot has recently made large investments in the form of
several big-scale growth initiatives including new distribution,
which is yet to show any desired positive results. However, the
company believes these initiatives will be accretive in the long
run and are optimistic about healthy operational results going
Green Dot is witnessing weak earnings estimate revisions since it
reported its last quarterly results. Over the last 60 days, the
Zacks Consensus Estimate for 2014 moved south by 18.1% to $1.04
per share as all the 5 estimates were revised downward. Likewise,
the estimate for 2015 decreased 12.2% to $1.22 over the same
Other Insurers Worth a Look
We prefer to avoid Green Dot for the time being. However,
investors interested in the business services sector may consider
better-ranked stocks like
Factset Research Systems Inc.
Global Payments Inc.
VeriFone Systems, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
FACTSET RESH (FDS): Free Stock Analysis
GREEN DOT CP-A (GDOT): Free Stock Analysis
GLOBAL PAYMENTS (GPN): Free Stock Analysis
VERIFONE SYSTMS (PAY): Free Stock Analysis
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