VeriFone Downgraded to Strong Sell - Analyst Blog


On Dec 21, 2013, Zacks Investment Research downgraded VeriFone Systems Inc. ( PAY ) to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

The downgrade primarily reflects VeriFone's weak fourth-quarter 2013 results. The company reported earnings of 13 cents (including stock-based compensation), which missed the Zacks Consensus Estimate by a nickel (27.8%).

Although VeriFone succeeded in beating the Zacks Consensus Estimate for revenues, gross margin (contracted 310 basis points) and operating profit (down 70.4%) suffered due to 11.5% year-over-year decline in revenues and 28.1% increase in operating expenses.

VeriFone's guidance also failed to impress. Management forecasted non-GAAP revenues to be in the range of $425.0 million-$430.0 million for the first quarter of fiscal 2014. This reflects an almost-flat growth from $429.0 million reported in the year-ago quarter.

Management expects first-quarter non-GAAP earnings to be approximately 26 cents per share, down from 40 cents in the year-ago quarter.

For fiscal 2014, non-GAAP revenues are expected to be in the range of $1.77 billion-$1.80 billion, higher than $1.71 billion reported in fiscal 2013. Operating expense is expected to increase approximately 11.0% to $535.0 million. Earnings are expected to be in the range of $1.35 to $1.40 per share.

Estimate Revision

The Zacks Consensus Estimate for the first quarter of 2014 has declined 28.0% (7 cents) to 18 cents over the last 30 days.

The Zacks Consensus Estimate for 2014 decreased 20.5% (26 cents) to $1.01 per share over the last 30 days. The Zacks Consensus Estimate for 2015 dropped 17.9% (31 cents) to $1.42 per share over the same period.

Other Stocks to Consider

Some better-ranked stocks in the financial transaction sector include Qiwi plc ( QIWI ) , Heartland Payment ( HPY ) and Alliance Data ( ADS ) . While Qiwi carries a Zacks Rank #1 (Strong Buy), both Heartland and Alliance have a Zacks Rank #2 (Buy).

ALLIANCE DATA (ADS): Free Stock Analysis Report

HEARTLAND PAYMT (HPY): Free Stock Analysis Report

VERIFONE SYSTMS (PAY): Free Stock Analysis Report

QIWI PLC-ADR (QIWI): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Stocks

Referenced Stocks: ADS , HPY , PAY , QIWI

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