VeriFone Systems (PAY, Financial) cheered the street with its fourth quarter results that came above the street expectations along with year-over-year growth in both revenue and profit. In fact, it was the fifth consecutive quarter of profit and revenue growth. It seems that VeriFone’s decision to move away from its traditional electronic payment terminals is paying off. Led by its strong performance, the stock soared considerably in the past year and is currently trading near its 52-week high with even better expectations for the days ahead. Starting with its numbers, let’s have a detailed analysis of this stock.
Quarterly performance and beyond
Its revenue for the quarter increased to $490.5 million from a year-ago period of $431.2 million and was better than the analyst expectations of $483.42 million. Earnings adjusted for one-time gains and losses came at 44 cents a share compared to 27 cents last year and also topped the 41 cents consensus estimate. For the first quarter of 2015, the company expects its revenue to be in the range of $480 million to $485 million with adjusted earnings of 40 cents per share. Analysts were expecting revenue of $482.94 million with an EPS of 45 cents.
The numbers are encouraging and VeriFone is continuing with its strategic initiatives to drive its growth ahead. Its top priority will be focused on managing its product portfolio, research and development and cost optimization. The company continues to benefit from its global product lines, which reported significant growth across various geographical locations.
Looking beyond the headwinds
However, for quite some time VeriFone had been facing issues related to its SKUs, which led to complexity, slow deployments and mounting costs in engineering and supply chain. This further affected its ability to innovate and deliver organic growth. But the management has taken various initiatives to address these issues and started with the reviewing of its SKUs and customizing request to ensure that they fit its strategy. Its product portfolio management also helped the company to identify its non-core business and divest them during the year.
Its fragmented product portfolio was a big problem for its R&D as well, since they spent considerable amount of time maintaining legacy products. But the management has made various changes including shifting its engineers from 75 sites into 34 and resizing its team to curtail expenses.
In addition, it will also introduce a new generation of mPOS terminals that will be compatible with a wide range of consumer tablets and smart phones, and run VeriFone and third party software. Apart from this, the company has planned a myriad of other launches that will drive its growth in the coming years.
Conclusion
The company has immense opportunities as its client base continues to increase. These are some encouraging efforts adopted by the company. The stock is currently near its 52-week high, and looking at its future prospects, we could see more upside from here on.
