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Verifone bullish on second half outlook

20 August 2008  |  4309 views  |  0 ticker 2

Despite a slowdown in the US markets, eftpos vendor Verifone says it expects to report a healthy rise in revenue and earnings in the remainder of its fiscal year.

Verifone says gross margin percentages are expected to improve "as the company has initiated several programs to improve efficiency, reduce product costs and change pricing strategies".

For the third quarter ended 31 July 2008, Verifone expects to report net revenues of $256 - $258 million, representing revenue growth rates of 10-11% over fiscal 2007. Excluding items, earnings are expected to be 34 cents to 35 cents a share.

For the fourth quarter the vendor expects to record net revenues of between $260 and $268 million, compared to $238 million in the comparable period of 2007. Earnings are expected to be in the range of 36 cents to 39 cents a share.

According to Reuters, analysts had expected Verifone to report earnings of 29 cents for the third quarter and 31 cents a share for the fourth quarter, before items.

Douglas Bergeron, CEO of VeriFone, says despite a slowdown in the US market, the company is seeing "excellent growth internationally and in the emerging markets in particular".

Looking ahead, Bergeron says: "For fiscal year 2009, we are prudently expecting that weak macro-economic conditions will prevail in North America and Western Europe, though we expect continued favorable conditions in the emerging markets."

For the full year ending 31 October 2009, VeriFone expects to achieve net revenue growth of 10 to 15%, adjusted Ebitda of between $182 and $206 million and net income per share of between $1.35 to $1.55.

Verifone stock rose over 35% on the back of the forecast in post-market trading yesterday. The stock continued to rally in pre-market trading and had risen over 20% to $18.11 shortly after the US markets opened on Wednesday.

But despite the rally, the shares are a long way off a 52-week high of $50, which was recorded before the vendor disclosed an accounting error which resulted in it overstating pre-tax profit for the nine months ending 31 October 2007. Verifone said the problem was caused by errors in valuing inventory in-transit as well as in allocating manufacturing and distribution costs to inventory.

In April Verifone said it chief executive officer Barry Zwarenstein had quit the company following the accounting error. The vendor has now named Clinton Knowles as interim CFO.

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