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Suravi Thacker
Suravi Thacker
Articles (157) 

Will VeriFone Systems Make Your Portfolio Grow?

June 26, 2014 | About:

Payment systems have evolved over the last few years, making lives easier for people. Electronic payment systems have been very useful and are now widely used by almost all the retailers. VeriFone Systems (NYSE:PAY) is one of the leading providers of electronic payment solutions and is set grow manifold. Its recent quarter was also a good one as it managed to beat the analysts’ expectations. Let’s take a closer look.

By the numbers

Revenue surged 8.6% to $467 million over last year’s quarter. This was quite higher than the estimate of $443 million. Key drivers of the top line growth were the addition of clients for its payment-as-a-service solution, benefits of recent buyouts in France and New Zealand. Also, growth in U.S. taxi market pushed revenue higher.

System Solutions revenue makes more than 60% of total revenue and jumped 5% over last year, clocking in at $290.7 million. Even Services revenue contributed well to the overall revenue by registering an increase of 17.4% over the prior year’s quarter.

The payment solutions provider witnessed sales growth in all the geographic regions, including North America (2.7%) and EMEA (10.3%). However, revenue from the ASPAC region (which includes regions such as China, India, Japan, New Zealand and Australia) grew a whopping 36% as sales in Australia did exceptionally well.

Adjusted earnings of VeriFone stood at $0.37 per share, again beating the analysts’ estimate of $0.33 per share. However, gross margin contracted 70 basis points mainly due to weakness in the services solutions segment, partly offset by strength in the systems solutions segment.

Future looks bright

VeriFone Systems provides some reasons to believe in its future. First, it has undertaken a restructuring plan which should lead to huge cost savings for the company. Under the program, it will cut its employee base by 500 people, consolidate one-fifth of its data centers and shut down 10 facilities. This program is expected to save $35 million of costs on an annual basis.

Also, the company has launched a new EMV capable device, called VX 690, which will let merchants use NFC and other mobile point-of-sale bandwidths. Australia will be the first region where the product will be made available.

Moreover, the payment solution retailer has won many new orders and clients which will continue to boost its revenue in the future. In fact, even big box retailer Target (NYSE:TGT) has opted for VeriFone’s POS devices so that its customers feel safe to make payments at Target stores. Target suffered from a huge data breach in December wherein it lost credit card information of its customers. Hence, the retailer shifted to VeriFone in order to win back customers’ trust. Moreover, VeriFone has also entered into partnership with American express which should again lead to higher revenue.

Ending thoughts

All these measures make VeriFone a very interesting investment pick. Addition of new clients, products and a well set restructuring program makes me positive about this company. Also, the retailer provided a bright outlook which further made investors happy. Therefore, VeriFone is definitely a great buy.

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GuruFocus has detected 4 Warning Signs with VeriFone Systems Inc $PAY.
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