VeriFone Beats on Revenue and Earnings, Why It Will Pay In 2015

NEW YORK (TheStreet) – VeriFone Systems (PAY) reported fiscal fourth-quarter financial results Monday that topped Wall Street estimates on both revenue and profits. But it wasn't just a typical beat.

The electronic payments terminal maker reported earnings of $31.1 million, or 27 cents per share after the markets closed on Monday. On an adjusted basis, when taking out one-time charges and gains, the company earned 44 cents per share, topping analysts' estimates by 3 cents, according to Thomson Reuters.

The San Jose, Calif., company reported revenue of $490.5 million, which also slightly beat Wall Street estimates of $484.4 million. But one of the more important numbers to focus on is the nearly 13.8% year-over-year growth VeriFone has posted for its revenue.

Same with the profits. Last year, VeriFone posted adjusted earnings of 27 cents per share. Monday's adjusted earnings of 44 cents represents a 63% jump in just one year. The stock has responded with year-to-date gains of 23.3%, which beats both the 7.6% gain in the S&P 500 (SPY) and the 3.6% gain in the Dow Jones Industrial Average (DJI) .

PAY Chart PAY data by YCharts

VeriFone investors have done well in 2014. And if the company's guidance is any indication, 2015 might be an even better year.

For the period ending in January, its fiscal first quarter, VeriFone expects to earn 40 cents per share on revenue in the range of $480 million to $485 million, compared to consensus estimates of $483.6 million. While the high-end of the range exceeds what analysts are expecting, the number is nonetheless conservative, especially with the busy holiday shopping season approaching.

VeriFone, which makes money from each consumer transaction on its electronic payment terminals, should capitalize from one of the busiest shopping periods in retail, according to the National Retail Federation (NRF). The organization expects shoppers to increase their spending by 5% year-over-year to $804 during the holiday season from $767.

And with VeriFone having now grown revenue and earnings sequentially for five consecutive quarters, this streak is likely to continue based on NRF's holiday sales projections.

Ahead of Monday's earnings report, there were concerns that rival Global Payments (GPN)  was taking market share from VeriFone. That doesn't appear to have been the case, despite Global Payments' 12% year-over-year jump in revenue and profits that beat Wall Street estimates by 8 cents a share. In fact, VeriFone's results suggests it is the one that is gaining market share.

Likewise, the buzz surrounding mobile payment services hurting VeriFone sales apparently has had no adverse effect. Recently, Apple  (AAPL)   launched its Apple Pay service, which allows consumers to use their iPhones to make payments, and eBay  (EBAY)  has had its longstanding service PayPal.

If anything, the attention Apple Pay and PayPal have drawn towards the payment industry has helped VeriFone. And with the stock having a high analyst price target of $43, which suggests a premium of roughly 30%, VeriFone is a solid stock for investors looking to get paid in 2015.

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This article is commentary by an independent contributor. At the time of publication, the author held positions in Apple.

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