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VeriFone Downgraded to Strong Sell - Analyst Blog

Posted: 12/26/2013 9:19:00 AM
Referenced Stocks: ADS;HPY;PAY;QIWI

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