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Moody’s Investors Upgrades VeriFone Systems to ‘Ba2’

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Price movement of VeriFone Systems

VeriFone Systems (PAY) has a market capitalization of $2.7 billion. PAY rose by 3.9% to close at $24.81 per share as of March 1, 2016. The stock’s price movements on a weekly, monthly, and year-to-date (or YTD) basis are 5.3%, 6.1%, and -11.5%, respectively.

Currently, PAY is trading 9.6% above its 20-day moving average, 2.0% above its 50-day moving average, and 16.8% below its 200-day moving average.

The Vanguard Small-Cap ETF (VB) invests 0.13% of its holdings in VeriFone Systems. The ETF tracks the CRSP US Small Cap Index. The market-cap–weighted index includes the bottom 2%–15% of the investable universe. The YTD price movement of VB was -6.8% as of February 29, 2016.

The market capitalizations of VeriFone’s competitors are as follows:

  • PayPal Holdings (PYPL) — $48.0 billion
  • NCR (NCR) — $4.1 billion
  • Heartland Payment Systems (HPY) — $3.5 billion
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Moody’s upgraded VeriFone Systems ratings

Moody’s Investors Service has upgraded VeriFone’s Corporate Family Rating (or CFR) to “Ba2” from “Ba3,” its Probability of Default Rating (or PDR) to “Ba3-PD” from “B1-PD,” and its first lien senior credit facilities to “Ba2” from “Ba3.” The ratings have stable outlooks.

Moody’s also raised VeriFone’s Speculative Grade Liquidity (or SGL) rating to “SGL-1” from “SGL-2.”

Performance of VeriFone in recent 4Q15 and 2015

VeriFone Systems reported 4Q15 total revenue of $514.1 million, a rise of 4.8% when compared to total revenue of $490.5 million in 4Q14. Its net income and EPS (earnings per share) rose to $38.2 million and $0.33, respectively, in 4Q15, compared to $31.1 million and $0.27, respectively, in 4Q14.

PAY’s non-GAAP (generally accepted accounting principles) net income and non-GAAP EPS rose to $56.2 million and $0.49, respectively, in 4Q15, rises of 12.2% and 11.4%, respectively, compared to the prior year’s period.

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2015 results

In 2015, VeriFone reported total revenue of $2,000.5 million, a rise of 7.0% YoY (year-over-year). Its net income and EPS rose to $79.1 million and $0.68, respectively, in 2015, compared to -$38.1 million and -$0.34, respectively, in 2014.

Meanwhile, PAY’s cash and cash equivalents fell by 16.5%, and its inventory rose by 4.3% in 2015. Its debt-to-equity ratio rose to 1.6x in 2015 compared to 1.5x in 2014.

The price-to-earnings and price-to-book value ratios of VeriFone are 36.5x and 3.2x, respectively, as of March 1, 2016.

Projections

The company has projected the following for 1Q16:

  • non-GAAP net revenues of $500.0 million
  • non-GAAP diluted EPS of $0.45

Additionally, VeriFone expects the following for 2016:

  • non-GAAP net revenue in the range of $2,090.0 million–$2,110.0 million
  • non-GAAP diluted EPS in the range of $2.15–$2.17

These projections reflect North American revenue growth of 5% and do not reflect revenue from pending acquisitions.

 Continue to the next part for a look at Polaris Industries.

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