What's In Store For VeriFone System (PAY) In Q1 Earnings?

VeriFone Systems Inc. (NYSE:PAY) is set to report fiscal first-quarter 2018 results on Mar 8.

In the last quarter, the company’s non-GAAP earnings of 44 cents per share beat the Zacks Consensus Estimate by a penny and surged 47.7% from the year-ago quarter.

In the trailing four quarters, the company surpassed the Zacks Consensus Estimate once while matched the same on the other three occasions, delivering an average positive surprise of 0.58%.

Non-GAAP revenues increased 2.6% year over year to $476.5 million and beat the Zacks Consensus Estimate of $472 million.

However, a soft guidance for the upcoming quarterly results makes us skeptical. For first-quarter fiscal 2018, VeriFone projects non-GAAP revenues between $418 million and $420 million, adjusted to exclude divested business.

Notably, VeriFone’s shares have lost 14.3% in the past year as compared with the industry’s growth of 34.2%.

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

Factors to Consider

VeriFone enjoys a premium position in the electronic payment systems and services market. Increasing demand for Point-of-Sale (POS) software and Payment-as-a Service technologies is a key catalyst.

VeriFone’s strong product portfolio which includes the likes of Carbon 8 and Engage are driving growth in the global market, particularly in Latin America and Europe, Middle East and Africa (EMEA).

The company’s mPOS device gained traction within a short span of time. In the quarter, VeriFone announced implementation of Mastercard’s M/Chip Fast technology across its payment solutions to enable faster checkout for EMV transactions. The company also extended global partnership with Alipay, which enables select Lacoste U.S. stores to accept Alipay.

However, management anticipates revenues in the Asia Pacific region to decline year over year. This is due to tough year-over-year comparison as in the first quarter of fiscal 2017, the company benefitted largely from sudden robust demand in India, courtesy of demonetization.

Additionally, the company’s divestitures of Petro Media and the Taxi businesses are expected to dent the top line in North America.

Nonetheless, the divestitures of the company’s non-core business are likely to have a positive impact on margins.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or #3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or #5) are best avoided. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

VeriFone has an Earnings ESP of -2.22% and a Zacks Rank #4. Therefore, our proven model does not show that the company is likely to deliver a positive surprise this quarter.

Stocks With a Favorable Combination

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

CSG Systems International Inc. (NASDAQ:CSGS) has an Earnings ESP of +2.94% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Autodesk Inc (NASDAQ:ADSK) has an Earnings ESP of +8.70% and a Zacks Rank #3.

Tech Data Corporation (NASDAQ:TECD) has an Earnings ESP of +0.28% and a Zacks Rank #3.

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