Morgan Stanley Reviews VeriFone Earnings

In a report published Friday, Morgan Stanley analyst Smittipon Srethapramote maintained an Equal-Weight rating on

, after the company reported its F2Q results. "This was the first mixed quarter on the execution front for the new mgmt with disappointing results in Asia. The silver lining is that mgmt is now taking more meaningful steps to address legacy issues in China, which should eventually help support share gains," Srethapramote said. VeriFone had achieved strong execution of its turnaround strategy for several quarters. It was able to offset the impact of missteps in Asia by EMV driven strength in North America and continued share recovery in keys markets, such as the UK, Germany, Italy, and Spain. VeriFone reported net revenues of $490mn, representing 5 percent y/y growth, and cash EPS of $0.44, representing 19 percent y/y growth. "Revenues in North America came in above our forecast, driven by EMV related demand, while revenues in Asia (- 27% YoY) missed expectations due to competitive pressures and a delay in a large order in Indonesia," Srethapramote wrote. The company has guided to 2015 revenues of $1.995bn to $2.0bn, up from the previous guidance of $1.990 to $2.0bn. The guidance for 2015 non-GAAP EPS range was raised to $1.81-$1.84, from $1.78-1.82. The EPS estimates for 2015, 2016 and 2017 have been raised from $1.38 to $1.48, from $1.66 to $1.73 and from $2.00 to $2.07, respectively. In the report Morgan Stanley noted, "The creation of separate China and LatAm segments along with leadership changes (China directly reporting into the CEO) should help to increase focus in these two key growth areas. Meanwhile, transformation efforts appear to remain on track, with better than expected upside from cost initiatives." Srethapramote said that visibility beyond the October 2015 EMV deadline in the US remains limited and "we would like to see more concrete evidence of progress in the Chinese POS terminal market, the largest and fastest growing market in the world, before becoming more constructive."