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Exclusive: VeriFone Shares in 'No Mans Land' After Dismal Earnings

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Payment processing company VeriFone Systems (NYSE: PAY) announced second quarter earnings that missed analyst expectations. Further, the company slashed guidance for the second time in three quarter as shares plummeted after hours to within breathing room of a new 52-week low.

CNBC Fast Money host and Metropolitan Capital Advisors co-Founder and President Karen Finerman, notably short the stock, commented exclusively to Benzinga after the earnings release. The stock is in "no mans land here" she said of the company after the dismal report.

Second Quarter

For the fiscal third quarter ended April 30, 2013, VeriFone reported non-GAAP earnings per share of $0.42, lower than the consensus analyst forecast of $0.47 per share by 10.64 percent. Earnings per share were down 34.375 percent from the same period a year ago.

Revenues were also weak in the quarter as the company struggles to grow its business. Revenues were reported at $426.3 million on a non-GAAP basis as compared to the consensus forecast of $440.3 million, missing by 3.18 percent. Revenues declined 12.44 percent from the same period a year ago.

Guidance

The company lowered guidance in the latest release, marking the second time in three quarters that the company has expected future operations to be worse than previously thought. For the third quarter of fiscal 2013, VeriFone sees earnings per share of $0.20, 60 percent below the consensus forecast of $0.50, while revenues is expected to be $400 million vs. the $450 million forecast on Wall Street.

In December, the company cut its view for the fiscal first quarter to between $0.70-$0.73 earnings per share on revenue between $490-500 million when analysts expected EPS of $0.75 and revenue of $498.5 million. The company only reported EPS of $0.51 for the first quarter.

Management Discussion

Commenting on the results, Richard McGinn, Interim Chief Executive Officer, said, “We are keenly aware of the significant short-term challenges impacting our fiscal year 2013 financial results. To regain our momentum, we are addressing the critical issues head-on. We have empowered a new senior leadership team. We are substantially increasing our R&D investment to best serve our customers and regain competitiveness in markets where we have product gaps. And, we have increased our focus on cash management, as evidenced by our generation of $79 million of operating cash flow in the second quarter."

“While we are pleased with many aspects of our business, the next twelve months will be devoted to investing heavily in our customers, our products, and our people, to reverse the current trend and reposition ourselves to resume growth. We believe there is significant upside potential for both the payment technology business and our company,” concluded McGinn.

Market Impact

VeriFone shares plunged in after hours trading by more than 10 percent on the guidance cut after closing down almost five percent in intraday trade. Shares were trading at $19.61 as of writing.

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