Despite the rising number of electronic payments, business is still up for Deluxe Corp., the nations largest paper-check printer.
Check writers continue to prefer and order checks and related products, said chief executive officer Lawrence J. Mosner in a conference call Thursday.
Deluxe announced third-quarter results that exceeded expectations. Net income of $51.1 million was up 8.7% from a year earlier. Because of stock repurchases since then, the per-share rise was a sharper 15.4%, to 75 cents. That well exceeded the Wall Street consensus estimate of 66 cents as recorded by Thomson Financial/First Call.
Observers have speculated that Deluxe would suffer as more consumers shifted to electronic payments to make purchases. And indeed there would be a lot more checks written today if there were no e-payments, said Stuart Alexander, a Deluxe senior vice president, in a phone interview after Thursdays conference call.
But though electronic payments have increased the overall volume of payments, we have not seen a decline in the number of checks being written, Mr. Alexander said.
This may change soon, he acknowledged.
We think at some point that will curve. It may be curving right now. Maybe a year from now we can say this was the year we began to see some decline in check usage.
Last year, in a nod to electronic payments, Deluxe spun off several of its electronic transaction businesses into a separate company, eFunds Corp., which began trading on the Nasdaq exchange in June 2000. The idea was to operate two companies that could trade at values more appropriate to their business niches.
The expectation was that eFunds, which houses an electronic funds transfer and check verification business, would benefit from the higher valuations being given at the time to electronic commerce companies. But the downturn of the Internet economy has caused the tables to turn.
Deluxes stock has risen 39% in the first nine months of this year. It closed Friday at $34.21, up 0.62%.
EFunds stock has been more volatile. It closed last Friday at $17.04, down 0.64% for the year. eFunds is expected to release third-quarter earnings this Friday.
Deluxes positive earnings are the result of cost management efforts, the deferral of project spending, and the discontinuance of an e-commerce initiative, said chief financial officer Douglas Treff.
The St. Paul companys third-quarter revenue rose 2.3% from a year earlier, to $323.5 million. The rise was 8.4% in Deluxes Direct Checks unit, which sells checks through direct mail and the Internet, and 7.8% in its business services unit, which sells to small businesses. The revenue of its financial services division, which sells checks through financial institutions, dipped 1.1%.
Deluxe projected fourth-quarter earnings of 65 to 68 cents a share and offered a word of caution.
Its difficult to predict what will happen to consumer confidence in light of the softness in the economy and the escalation of the countrys anti-terrorism military actions, Mr. Mosner said. But as consumers spend less, they use fewer checks.
Although our business isnt typically affected immediately in a recession, consumers may be slower to use their check supplies, meaning that orders are likely to drop off.
