Earnings estimates for VeriFone Systems Inc. ( PAY - Analyst Report ) have declined of late, although second quarter results beat estimates by a penny.

VeriFone posted net income of $14.5 million in the second quarter of fiscal 2012 or $0.13 per diluted share, compared with a net loss of $3.1 million or ($0.03) per share in the previous quarter and a net income of $25.2 million or $0.27 per share in the year-ago quarter. Excluding one-time charges but including stock-based compensation expense, net income came in at $0.54 per share, beating the Zacks Consensus Estimate by a penny.

All the four analysts covering the stock have reduced their estimates for fiscal 2012, leading to a marginal decline in annual estimate.

Although VeriFone is growing through acquisitions, organic growth remains a matter of concern. We believe that the integration of Point operations is taking a toll on margins.

VeriFone recently completed the acquisition of Point, which provides payment and gateway services and solutions for retailers in Northern Europe. VeriFone intends to extend the Point platform throughout the region and beyond, with the aim of creating the world's largest infrastructure for rapid deployment of alternative payments.

We believe that this acquisition is a positive for the company, since it expands the product portfolio as well as accelerates the mix of revenues toward higher margin services revenues. VeriFone has begun the process of rollout of Point’s payment-as-a-service offering beyond Point's traditional markets.

Going forward, VeriFone expects to see strong demand in the third quarter as well. However, concern looms large over the potential impact of a declining euro and other currencies when converted into U.S. dollar.

For the third quarter, VeriFone expects to report net revenues between $495 million and $500 million. Excluding stock-based compensation, net income per diluted share is projected between $0.68 and $0.70.

For fiscal 2012 (including 10 months of Point revenues), VeriFone expects to report net revenues between $1.900 billion and $1.925 billion. Excluding stock-based compensation, net income per diluted share is projected between $2.60 and $2.66.

Earnings estimates for fiscal 2013 have also moved lower in the last thirty days due to declines in estimates by the three analysts covering the stock.

We believe the risk-reward equation is balanced as of now and hence maintain our Neutral recommendation in the long run. However, the stock currently carries a Zacks #4 Rank, which translates into a short-term rating of Sell due to near-term pressure on margins and consequently its bottom line.