"Given the recent run in the stock, we expect shares of Verint Systems (Nasdaq: VRNT) to modestly trade down following in-line third quarter results and guidance that was in line with our and consensus expectations, after adjusting for recent acquisitions. We would look for pullbacks into the mid thirties to add to positions," Lehman Brothers analyst Israel Hernandez writes, following the release of Verint's third quarter financials.
Hernandez rates security technology company Verint "Overweight", with a price target of $40. Bearing out Hernadez's expectations, Verint shares are currently down 7.57%, at $36.76, giving the company a market cap of $1.17 billion.
"Verint reported in line third quarter results of $78.2 million and $0.26 proforma (+22% year-on-year) vs our estimates of $77.0 million and $0.26," Hernandez notes.
"The quarter was driven by strong performance in the core Digital Security Surveillance (DSS) business which grew 29.8%y/y and represented 68.7%of total revenue. Enterprise Business Intelligence (EBI) continued to decelerate and posted year-on-year growth of 8.3%, representing 31.3%of total revenue.
"Management expects EBI growth to accelerate to 20% over the next 12 months based on a review of the current activity in the pipeline. The security business continued to show strong growth driven and sustained by heightened security awareness among government and corporate sectors, especially in light of recent terrorist activity. This activity has apparently led to broader adoption for Verint’s video surveillance solutions and has led to several incremental million dollar deals.
"For example, Verint is seeing high demand for their network video solutions from mass transit customers around the world and has served deployments in various stages of implementation. Recent mass transit wins include a multi-million dollar order for a mass transit system in a major metropolitan area in the Asia-Pacific region, a contract with King’s Cross Station in the UK, a deal with Metro Valencia in Spain, and an order in New York.
"Recent video surveillance government contracts include a deal with US Department of Defense and a new UK government order.
"Verint also singed a multi-million dollar expansion communications and interceptions solutions order with an international law enforcement customer.
"Verint ended the quarter with backlog in excess of one quarter of revenue, unchanged from the prior quarter.
"For the fourth quarter, Verint is forecasting revenue of $82 million (+19% year-on-year) and pro-forma EPS of $0.28.(consensus:$82 million and $0.30).
"Management slightly raised 2005 revenue guidance to $307 million from $303-$306 million and narrowed the EPS guidance range to $1.03-$1.04 from $1.02-$1.05.(consensus:$306 million and $1.04).
"Management provided a relatively upbeat outlook on 2006, suggesting organic growth of 15% and total growth of 22% driven by continued strong demand in DSS and acceleration in EBI.
"Verint introduced 2006 guidance of $365-375 million in revenue and $1.30 in EPS, in line with consensus estimates of $365 million and $1.31 and $0.05 ahead of our EPS estimate. However, revenue guidance was slightly below consensus and our expectation after adjusting for the MultiVision acquisition.
"We are slightly raising our Q4 revenue estimate to $82 million (+19% year-on-year), from $80.8 million, and maintaining EPS of $0.28, in line with management guidance. Accordingly, we are raising our 2005 revenue estimate to $307.0 million (+23% year-on-year) from $304.5 million and maintaining our EPS estimate of $1.03."
Published by Globes [online], Israel business news - www.globes.co.il - on December 7, 2005