Don't know if this old one was posted.
Noise
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'Lean, Mean' CheckFree Draws Praise from Street
American Banker Monday, April 29, 2002
By Steve Bills
Having announced a 13% work force reduction last month and taken other cost-saving measures this year, CheckFree Corp. now appears to be fortifying its position in the online bill payment and presentment market.
Calling the Atlanta company "a lean, mean EBPP machine," Craig Peckham, an analyst at Jefferies & Co., on Wednesday raised his rating for CheckFree's stock to "buy" from "hold" and set a price target of $25 a share.
Two other firms raised their ratings after CheckFree reported its earnings late Tuesday: U.S. Bancorp Piper Jaffray to "outperform" from "market perform," and A.G. Edwards & Sons Inc. to "strong buy" from "hold."
"CheckFree has presented convincing evidence that, through major restructuring efforts, it is achieving the heretofore elusive 'scaling out' of its core electronic bill payment and presentment franchise, and is realizing the commensurate rapid profitability improvement for which we had long hoped," Mr. Peckham wrote in a note to investors.
In an interview Thursday, Jeffrey B. Baker, an analyst at Jaffray, praised CheckFree's cost control efforts and said that it could end up in an "oligopolistic" position. When the nascent EBPP market finally matures, CheckFree may have only one serious competitor, Marshall & Ilsley Corp.'s Metavante Corp., he said. "We see competition come and go in this space."
"People realize what a great business this is going to be one of these days," when people in large numbers begin paying their bills over the Internet rather than by mail, Mr. Baker said.
However, he warned that CheckFree is a "story stock" and that the EBPP market has been slower to develop than many had hoped.
The industry faces some daunting challenges, Mr. Baker said. "There are a lot of quality issues on the back end."
The company reported a pro forma profit of $5.9 million for its fiscal third quarter, which ended March 31. Pro forma earnings per share of 7 cents a share beat the consensus estimate as compiled by Thomson Financial/First Call by 5 cents.
The pro forma numbers exclude such one-time items as a $15.9 million charge to cover the cost of closing four offices and dismissing 450 workers, a move designed to streamline operations.
"We continue to get better at what we do," Peter J. Kight, the company's chairman and chief executive officer, told analysts in a conference call.
Pete Sinisgalli, its president and chief operating officer, pointed to "very strong results from Bank of America." At the end of the quarter about 20% of CheckFree's subscribers were Bank of America customers, who accounted for 30% of CheckFree's transaction volume.
On a GAAP basis, the company reported a net loss of $77.5 million, or 89 cents a share, versus a loss of $101.1 million, or $1.17 a share, in the same period last year. Revenues grew 10%, to $113.1 million.
CheckFree forecast fourth-quarter revenue of $125 million to $130 million, with pro forma earnings per share of 12 to 14 cents. It also raised its earnings per share forecast for the full fiscal year, to 17 to 19 cents from its previous guidance of the "low to mid teens." In fiscal 2001 it posted a pro forma loss of 18 cents per share.
At the end of the quarter CheckFree had signed up 250 billers, including 194 "live and in production," 26 available through account aggregation, and 30 smaller, "non-primary" billers, Mr. Sinisgalli said. signed to its service, reversing a decline to 244 in the preceding quarter, when it dropped 48 billers that were not proceeding with their EBPP plans.
Mr. Kight predicted that this quarter the subscriber base would grow by 5% to 7% and that Bank of America Corp. would complete the conversion of its California EBPP customers to CheckFree.
"We are not trying to be the cheapest provider in any of our businesses," he said during the conference call. "We are focused on providing the best value."
CheckFree shares closed Friday at $19.08, up 12.8% from a week earlier. |
