[standard & poors] VERIFONE SYSTEMS (PAY) POSTS Q2, ISSUES GUIDANCE

VERIFONE SYSTEMS (PAY) POSTS Q2, ISSUES GUIDANCE. DEUTSCHE BANK KEEPS SELL
3 days 2 hours 14 minutes ago - Standard & Poor's
Analyst Bryan Keane tells salesforce PAY's $479M Q2 adj. revs, $0.64 EPS beat his $473M, $0.61 ests, but its $495M-$500M, $0.68-$0.70 Q3 view was slightly below his ests. Also, PAY reiterated FY 12 (Oct) guidance, while Street expected a raise in his view. Notes PAY cited forex as cause for weak guidance, which was surprising considering co.'s prior position that forex has no material impact, as co. adjusts its pricing, prices most contracts in U.S. dollars. Given co.'s "abysmal" $13M Q2 free cash flow (vs. $25M in Q1), lack of fin'l transparency, keeps sell. B.Egli

..VeriFone slumps as 3Q forecast disappoints Street
VeriFone Systems slides as foreign currency exchange rates hit 3rd-quarter outlook

Associated Press – Fri, May 25, 2012 1:08 PM EDT
....
NEW YORK (AP) -- Shares of VeriFone Systems Inc. skidded Friday as the electronic payments company's third-quarter outlook fell short of Wall Street estimates.

THE SPARK: After the market closed Thursday, VeriFone said it expects to report an adjusted profit of 68 to 70 cents per share in the fiscal third quarter, and said revenue would be between $495 million and $500 million.

On average, analysts expected earnings of 70 cents per share on $501.9 million in revenue, according to FactSet.

VeriFone backed its full-year profit and revenue forecasts, but the guidance put a damper on the company's second-quarter results, which were about equal to analysts' estimates.

THE BIG PICTURE: In a conference call with analysts and investors, VeriFone Chief Financial Officer Robert Dykes said demand should remain strong, but its revenue is being hurt because the euro and other currencies are weakening relative to the dollar. That affects its sales in overseas markets.

"The recent strength of the U.S. dollar has taken away the increase would otherwise have reflected in our guidance," Dykes said.

The San Jose, Calif., company has expanded its overseas business through recent acquisitions. In August, VeriFone bought electronic-payment provider Hypercom Corp. for $420 million in stock after agreeing to sell Hypercom's U.S. business. In early January, it bought Swedish payment services provider Point for $782 million.

THE ANALYSIS: Citi Investment Research analyst Philip Stiller said the company's recent purchases have been "Europe-centric" and the euro has gotten significantly weaker in recent weeks. He said that weakness is cutting $10 million to $20 million from VeriFone's expected annual revenue.

Stiller maintained a "Buy" rating on the stock, saying its second-quarter results were strong and recent acquisitions Hypercom and Point did better than expected.

"While the negative stock reaction ... implies that investors believe VeriFone is using foreign exchange as an excuse, our analysis shows that the headwinds are real and VeriFone is working hard to offset them," he said. "We do not believe VeriFone is using foreign exchange as an excuse to account for weakness elsewhere.