VeriFone Earnings Preview

Dec.13.11 | About: VeriFone Systems, (PAY)

VeriFone Systems Inc. (PAY) is expected to report fourth quarter results on December 14, 2011.

The company expects revenue between $409 million and $411 million in the fourth quarter, up from its previous estimate of $395 million and $400 million.

Excluding amortization of step-down in deferred revenue on acquisition, VeriFone expects revenue between $414 million and $416 million.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, stock compensation, acquisition-related expenses, restructuring costs and certain other expenses and income that result from unique or unplanned events) is estimated between $77 million and $81 million. As of October 31, 2011, VeriFone had cash and cash equivalents of $595 million.

Last month, VeriFone signed a definitive agreement with Nordic Capital Fund V to acquire European-based Point for approximately $824 million. Management expects to close the acquisition by the end of 2011. The transaction is expected to be accretive to the bottom line by $0.08 – $0.10 in fiscal 2012 and by $0.30 – $0.35 in fiscal 2013.

VeriFone expects the acquisition to add approximately $260 million to the top line in the first year. The acquisition is also expected to be immediately accretive to gross margins, operating margins and growth rates. The company further expects total services revenue to exceed 30% of total sales in fiscal 2012 and 50% by fiscal 2015.

Excluding any impact from the planned acquisition of Point, VeriFone expects revenue between $400 million and $405 million for the first quarter of fiscal 2012. Net income is projected to be in the range of $0.50 - $0.52 per share.

Excluding any impact from Point, VeriFone projects revenues in the range of $1.70 billion to $1.72 billion for fiscal 2012. Net income is projected between $2.45 and $2.50 per share.

Earnings estimates for fiscal 2011 have been static as of late. Earnings estimates for 2012 have increased by $0.02 to $2.21.

We currently have a Neutral recommendation on VeriFone. The company holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating.

Read the full analyst report on PAY