VeriFone Systems (PAY +0.00%) will release its quarterly report on Thursday, and the stock has continued to fall in light of new challenges facing the payment processor. With revenue expected to decline sharply again this quarter, VeriFone earnings should continue to drop compared to year-ago levels, raising questions about the company's future strategic direction.
VeriFone has been an important company in the payment-processing space, helping to connect thousands of companies in its broad payment network. A huge rise in competition, however, has threatened the company's traditional strength in the industry. So far, VeriFone's response to the competitive threat hasn't been sufficient to give investors confidence that the company will remain an industry leader. Let's take an early look at what's been happening with VeriFone over the past quarter and what we're likely to see in its report.
Stats on VeriFone
|
Analyst EPS Estimate |
$0.20 |
|
Change From Year-Ago EPS |
(73%) |
|
Revenue Estimate |
$400.83 million |
|
Change From Year-Ago Revenue |
(18.7%) |
|
Earnings Beats in Past 4 Quarters |
2 |
Source: Yahoo! Finance.
How can VeriFone earnings pay off for investors?
In recent months, analysts have dramatically marked down their views on VeriFone earnings, slashing July quarter estimates by 60% and cutting full-fiscal year projections for both this year and next by about a third. The stock has continued to drop, falling 16% since late May.
Much of the damage to VeriFone came as the company announced its fiscal second-quarter earnings in early June. Even though VeriFone has been working hard to try to turn around its business, earnings and revenue came in well short of expectations. Even worse, the company gave guidance that forced investors to downgrade their future views on earnings and revenue, with calls for $400 million in sales coming in about 13% below previous expectations and earnings guidance less than half of what shareholders expected to see.
But VeriFone made a big step forward toward getting back into the payment-processing game last month, creating a partnership with daily deals giant Groupon (GRPN 0.25%) to offer users of its terminals access to Groupon's payment service. That move is arguably more significant for Groupon as it tries to find a new source of growth. For VeriFone, the partnership marks yet another attempt to avoid disintermediation, as it tries to convince eBay's (EBAY 1.74%) PayPal and other big players that having their payment services accepted not just online but in physical stores as well unlocks greater value.
VeriFone has also worked hard to get its mobile-payment business moving forward. Last month, the company said it would work to help a French passenger railroad accept mobile payments for ticket purchases, and it is also working with New York City taxi cabs to expand service across the city with terminals that include GPS and driver information as well as the ability to accept credit cards.
In the VeriFone earnings report, watch for any signs of the company raising discussions with Facebook (FB +0.35%) and other mobile-payment players with which it doesn't have relationships. Given the huge amount of data that VeriFone has access to, the company might be of interest as a potential takeover target to a company seeking to ramp up its growth in the sector.
Click here to add VeriFone to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
