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What VeriFone Systems Inc (PAY) Has to Do to Recover

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On Wednesday, VeriFone Systems Inc (NYSE:PAY) will release its latest quarterly results. With its stock having plunged after giving troubling guidance back in February, the payment processor has something to prove to investors in this quarter’s report.

VeriFone has the potential for greatness, given its importance in the payment processing industry. Yet competition has become cutthroat among various players in the space, which include not only traditional rivals but also up-and-coming new upstarts that are making their presence felt in a big way. Let’s take an early look at what’s been happening with VeriFone Systems Inc (NYSE:PAY)over the past quarter and what we’re likely to see in its quarterly report.

Stats on VeriFone

Analyst EPS Estimate $0.47
Change From Year-Ago EPS (27%)
Revenue Estimate $440.29 million
Change From Year-Ago Revenue (8.2%)
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Will VeriFone pay off for investors this quarter?
In the past three months, analysts have cut their views on VeriFone Systems Inc (NYSE:PAY)’s earnings further, even after the initial shock of February’s poor guidance. Their estimates on the April quarter have declined by $0.03 per share, but the hits to consensus for the current and next fiscal years amount to a more significant $0.15 per share. The stock has recovered somewhat, though, rising more than 20% since the beginning of March.

After the February guidance cut, VeriFone Systems Inc (NYSE:PAY) wasted no time taking action. In early March, the stock roared higher after the company said that CEO Douglas Bergeron would step down, ending his 12-year tenure and signaling VeriFone’s ambition to move in a new strategic direction.

VeriFone Systems Inc (PAY)One important area that hasn’t gotten a lot of attention is payment processing centers on international markets, and there, VeriFone got some good news in April. The company got a two-year contract with ChinaPnR to install and maintain point-of-sale systems and provide training to users, giving it access to a payment network with volume in the hundreds of billions of yuan. With point-of-sale transactions rising dramatically in the emerging-market country, VeriFone Systems Inc (NYSE:PAY) is smart to build on its presence there.

But the key to payment processing’s future remains the mobile market, and there, VeriFone faces huge competition. eBay Inc (NASDAQ:EBAY)‘s PayPal has consistently upped the ante in mobile payments, with incentives like offering transaction-fee-free processing for businesses that replace cash registers with iPad-based transaction management. With smaller companies like Square and Flint having emerged in the mobile space, it’s likely only a matter of time before bigger companies acquire the upstarts to move their mobile-payment presence forward. For instance, if Groupon Inc (NASDAQ:GRPN) is serious about trying to make waves in mobile payments, purchasing Square would be a natural fit for the company.

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