VeriFone Winning Back Confidence (PAY)

Winning back the confidence of investors is no easy task after accounting irregularities or after scandals involving the books.  However, winning back investor confidence is what VeriFone Systems Inc. (NYSE: PAY) seems to be doing.  With its old blow-up woes behind it, VeriFone has just beaten its earnings expectations for what looks to be the fifth time in a row.  The maker of electronic payment processing systems said its fiscal second quarter profit rose 89%, and it saw higher revenue along with higher margins.  For the last quarter the company reported $0.23 net EPS but $0.29 EPS non-GAAP.  Its revenues were up almost 20% to $240.7 million. Its prior guidance was $0.25 to $0.26 EPS with revenue of $225 to $230 million. Thomson Reuters had estimates of $0.26 EPS on $227.36 million in revenue.

For guidance, it raised the estimates to $0.29 to $0.30 EPS on revenues of $245 to $250 million versus Thomson Reuters estimates of $0.28 EPS and $236 million in revenues.  For all of 2010 the company is targeting $1.12 to $1.15 EPS on revenues of $960 to $970 million.  That compares to a prior target of $1.00 to $1.10 EPS on revenue of $925 to $940 million.

The turnaround here now appears to be continued, and the question is if the company can get back its old solid position before it imploded in late-2007.  If the company merely meets the lower-end of its guidance today for 2010 of $960 million to $970 million, then it is back on the path for growth as revenues were $844.7 million for its fiscal (OCT) 2009 and $921.9 million for its fiscal 2008.

It may also be time for at least some upgrades from analysts if the valuations can be easily justified.  Most analysts have not issued buy or similar ratings on the stock in some time, in part because its forward earnings estimates are roughly at the market for multiples.  The mean analyst consensus is for a price target of nearly $23.00.  Before this one imploded in late-2007 it was almost a $50.00 stock.

Perhaps the biggest issue here remains that it still carries what many would read as being in the red with a net negative tangible book value.  But it is also still flush with cash as of today.

Shares closed up 2.9% at $17.31 in regular trading and the stock is up over 2% more at $17.69 in the after-hours trading.   The 52-week range is $6.22 to $23.75.

JON C. OGG