VeriFone Systems, Inc. PAY is set to report fourth quarter and fiscal 2015 results on Dec 14, after the market closes. Last quarter, the company posted a negative earnings surprise of 2.56%. However, it has delivered positive surprises in three of the trailing four quarters, translating to an average positive surprise of 10.33%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
VeriFone seems well-positioned to gain from the ongoing demand shift toward EMV and NFC capable terminals. Furthermore, the company is benefiting from the presence of tech giants like Apple AAPL, Alphabet’s GOOGL Google and Samsung in the mobile payments industry.
Additionally, the company is also focused on increasing its operational efficiency by taking a number of cost-cutting and streamlining measures. This has increased margins over the past few quarters.
The third quarter had been an important one for the company as it initiated its buyback program and also announced plans to acquire two new companies- InterCard AG, a leading Payment as a Service provider and Curb, specializing in the car-for-hire electronic hailing (e-hail), payment and media business.
Nonetheless, VeriFone faces significant competition from a number of local providers in the domestic, international as well as emerging markets such as China and India. At the same time, we believe VeriFone’s highly leveraged balance sheet can limit its developmental activities.
VeriFone expects non-GAAP earnings per share in the fourth quarter to be in the range of 47–48 cents. Management had narrowed the fiscal 2015 earnings per share guidance, but at the same time mitigated a lot of investor concern by dismissing the anticipated “cliff” for EMV revenues in North America. Instead, it projects revenues to grow 3% in 2016 and expects the momentum to continue on account of sizeable greenfield opportunities.
Earnings Whispers?
Our proven model does not conclusively show that VeriFone will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: VeriFone has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 40 cents.
Zacks Rank: VeriFone’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stock to Consider
Here is another stock which you may want to consider as our model shows that it has the right combination of elements to post an earnings beat in its upcoming release:
The Earnings ESP for AbbVie Inc. ABBV is +1.75% and it carries a Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment