Buckle Up, Verint Systems Stock Is About to Take Off

Source: Thinkstock

Source: Thinkstock

Verint Systems Inc. (NASDAQ:VRNT) is not a household name, but it provides “Actionable Intelligence” solutions and value-added services worldwide that have led to strong returns for shareholders. Its very profitable “Enterprise Intelligence Solutions” segment offers workforce optimization solutions comprising quality monitoring, full-time and compliance recording, voice biometrics/fraud detection, voice of the customer analytics, workforce management, desktop and process analytics, performance management, eLearning and coaching, and public safety workforce optimization.

It also offers customer service solutions, including agent desktop, case management, email management, knowledge management, live chat, co-browse, experience analytics, web self-service, and experience community solutions for the customer engagement optimization market. The company’s “Communications and Cyber Intelligence Solutions” segment provides communications interception, communications service provider compliance, mobile location tracking, open source web intelligence, and tactical communications intelligence solutions for the security intelligence market. Its “Video and Situation Intelligence Solutions” segment offers physical security information management, IP video management software, edge devices, video analytics, and network video recorders for the fraud, risk, and compliance market. One key thing the company also provides is mobile device tracking solutions for security applications. In this capacity it serves government, law enforcement, transportation, critical infrastructure, and commercial organizations.

The stock is up 75 percent in two years, and I believe that the company’s recent performance indicates that the stock could go much higher. To the point, the company delivered solid earnings. On a GAAP basis for the quarter the company saw revenues of $257.4 million and operating income of $1.0 million. This translates to a diluted earnings per share of $0.51. On a non-GAAP basis, the company saw revenues for the quarter come in at $269.3 million. This led to non-GAAP operating income of $51.0 million and translates to a diluted earnings per share of $0.72.

Speaking about the quarter Dan Bodner, CEO and President stated, “We are pleased with our first quarter non-GAAP revenue of $269 million which drove strong cash flow and earnings. Our financial results and business activity for the first quarter have made us more optimistic about the year, and we are raising our annual guidance. We experienced broad strength across many areas. Customer reaction to our combination with Kana has been very positive. Our Enterprise Intelligence segment achieved year-over-year revenue growth of 47 percent including Kanas results, and 11 percent excluding Kana’s results. Our Communications and Cyber Intelligence segment achieved 21 percent year-over-year revenue growth. Our focus on actionable intelligence combined with our broad portfolio, position us well for long-term growth.”

While the quarter was strong it was the upbeat guidance that to me suggests the stock is prepped to move much higher. The company raised its revenue guidance by $30 million from a range of $1.08 billion to $1.13 billion, to a new expected range of $1.11 billion to $1.16 billion. The company also raised diluted earnings per share guidance by 10 cents from a range of $3.20 to $3.40, to a new range of $3.30 to $3.50.

For the remainder of the year, the company expects revenue to gradually increase from the first quarter levels although it is unclear in which quarter margins will be most favorably impacted. With such a bullish guidance and strong report, I believe Verint Systems’ stock is set to move substantially higher this year.

Disclosure: Christopher F. Davis holds no position in Verint Systems and has no intentions of initiating a position in the next 72 hours. He has a buy rating on the stock and a $60 price target.

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