VeriFone (PAY) To Report Q2 Earnings: What Lies In Store?

VeriFone Systems, Inc. (NYSE:PAY) is set to report results for the second quarter of fiscal 2017 on Jun 8. Last quarter, the company’s earnings came in line with estimates. For the trailing four quarters, the company has an average negative earnings surprise of 1.03%.

Non GAAP revenues of $456.6 million topped the consensus mark of $449.1 million. On a year-over-year basis, non GAAP revenues fell 11.1%.

The declining revenues negatively impacted the stock price. We note that the company has underperformed the Zacks Financial Transaction Services industry on a year-to-date basis. While the industry gained 18.8%, the stock returned 5.9%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

VeriFone has a strong foothold in the electronic payment systems and services market and is likely to benefit from the ever-expanding demand for Point-of-Sale (POS) software and Payment-as-a Service technologies.

The company’s diverse product portfolio has helped it gain momentum. Also, inorganic growth has added to its top line.

In the second quarter, the company entered into a joint venture with Gas Station TV (GSTV), an American video network at the pump. The partnership is likely to be a positive for VeriFone’s near-term results, with GSTV having access to on-the-go active consumers.

For the second quarter, the company projects non-GAAP revenues of approximately $470 million to $474 million. Non-GAAP earnings are expected to be 29 cents per share.

However, increasing competition from peers like NCR Corp (NYSE:NCR) and Square Inc. (NYSE:SQ) is a headwind.

Earnings Whispers

Our proven model does not conclusively show that VeriFone will beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: VeriFone has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: VeriFone carries a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stock to Consider

Investors can consider the following stock, which, according to our model, has the right combination of elements to beat earnings in its upcoming release:

Lam Research Corporation (NASDAQ:LRCX) has an Earnings ESP of +1.66% and a Zacks Rank #1. You can see the complete list of today’s Zacks Rank #1 stocks here.

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