VeriFone Slides After Cutting 2016 Profit, Sales Forecasts

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  • Profit will be $1.64 to $1.65 a share. Previous outlook: $1.85
  • ‘Difficult but temporary’ market, EMV issues, CEO Galant Says

VeriFone Systems Inc., one of the world’s largest makers of credit card and electronic-payment hardware, tumbled Friday after cutting its full-year profit and sales forecasts for a second straight quarter on weakening demand.

Fiscal 2016 earnings will be $1.64 to $1.65 a share, excluding some items, down from a June forecast of $1.85, San Jose, California-based VeriFone said Thursday in a statement. Sales will be $2 billion, compared with its June outlook of $2.1 billion. The shares fell 18 percent to $16.57 at 9:47 a.m. in New York and are down about 40 percent this year.

VeriFone had reaped benefits from the U.S.’s shift to terminals that accept credit and debit cards with embedded digital chips, but now many large merchants have already made the switch, and smaller merchants are delaying purchases. And some merchants that bought VeriFone hardware haven’t been able to turn their machines on, because of delays in getting them certified. Those delays have impacted the company’s service revenues.

“We are managing through what we believe are difficult but temporary local market and lingering EMV adoption issues,” Chief Executive Officer Paul Galant said in the statement, using the industry term for chip-card technology. VeriFone also cited macroeconomic and political issues in Turkey and Latin America among its challenges.

In June, the shares slid the most in more than three years after the company cut its outlook for full-year earnings by as much as 17 percent.

“The factors dragging results down appear to be temporary, but they are now unlikely to reverse until 2018,” said Gil Luria, an analyst at Wedbush Securities Inc.

  • Profit excluding some items of 42 cents a share in the third quarter ended July 31 topped the 40-cent average of estimates compiled by Bloomberg. Sales of $493 million fell short of the $515.8 million average projection.
  • VeriFone forecast fourth-quarter profit of 28 cents to 29 cents a share. That compares with the 50-cent average of estimates.

Former CEO Doug Bergeron, who has said he may seek a buyout of the company at the right price, said Thursday he expects the stock price to drop lower still in the coming months. Bergeron was the CEO of VeriFone for 12 years before being ousted in 2013 following disappointing results.

“I think the shares have not bottomed out yet,” Bergeron said in an interview. “We are going to reach a point of investor capitulation. I’ve been telling people for some time: When it’s bad, it’s bad for a while.”

A VeriFone spokesman declined to comment on Bergeron, referring instead to Galant’s remarks.

Bergeron said he is talking with potential buyout investors, “but there’s no hurry. The stock has to find a floor, and then to languish there. I reckon we are six to 12 months away from finding a new bottom. This thing will become actionable next summer.”