How Analysts View Verint Systems After Earnings

Security software maker Verint Systems Inc. (NASDAQ: VRNT) saw its shares drop by around 15% after reporting earnings last Tuesday after the market closed. The company posted earnings per share of $0.90, well below the consensus estimate of $1.17. Revenues of $281 million were also well short of a consensus estimate of $319 million.

Verint’s outlook for fiscal 2017 now calls for revenues to drop or rise in a range of negative 2% to positive 2%, and for EPS to be similar to fiscal 2016’s adjusted EPS of $3.04. The company further estimated that its Enterprise Intelligence segment will have mid-to-high single-digit revenue growth, and that its Security Intelligence segment revenue is expected to decline by 10% to 15%. The consensus estimates now call for EPS of $3.14 and $1.22 billion in revenue.

By the end of the week, Verint had recovered virtually all the value it lost, despite an analyst’s downgrade and a number of price target cuts. Credit Suisse cut Verint’s price target from $60 to $45 and lowered its rating from Outperform to Neutral. The analysts also offered the following details:

However, it now appears that the headwinds are more structural (or at least longer-term) in nature, as mgmt. cited several reasons for the weaker outlook including: (1) challenging approval cycles for large transformational deployments causing Verint to pivot to smaller entry-level packages; (2) customer preference to purchase individual point solutions initially, which is somewhat contrary to Verint’s integrated suite strategy, and (3) general pressure on gov’t budgets from macro headwinds in emerging markets. As such, we move to the sidelines as we believe Verint shares will not outperform in the near-term as it could take several qtrs. for the company to re-work its product mix and go-to-market strategy.

Here are other ratings changes since the company announced earnings:

  • Credit Suisse cut its rating on the stock to Underperform.
  • Deutsche Bank lowered its price target from $50 to $35.
  • Deutsche Bank cut its rating from Buy to Hold.
  • Oppenheimer sliced its price target from $60 to $49 while maintaining its Outperform rating.
  • RBC cut its price target from $45 to $39 with an Outperform rating.

Verint shares closed up 2.9% on Friday, at $34.34 in a 52-week range of $29.76 to $66.45. The consensus price target on the stock is $41.67, though it may not yet include the recent changes.