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Heartland Payment Systems Inc. expects to release its fourth-quarter and full-year financial results Tuesday, and at least two analysts predict the merchant processor will report revenue growth for the quarter. But analysts are less clear about the impact Heartland's Jan. 20 announcement of a major data breach in 2008 will have on the Princeton, N.J.-based company's growth this year. In a research report released yesterday, Franco Turrinelli, an analyst at Chicago-based William Blair & Co. LLC, predicts Heartland will report $399.2 million in fourth-quarter revenue, which would represent a 16.9% increase from $341.6 million for the same period in 2007. In a separate research report, James Friedman, an analyst at Susquehanna International Group LLP, predicted Feb. 5 that Heartland would report fourth-quarter revenue of $399.6 million, which would be 17% greater than a year earlier. For the full year, Heartland will report revenue of $1.56 billion, up 19.1% from $1.31 billion in 2007, Friedman predicts. The financial impact of the data breach is less certain because the card networks likely will levy penalties for the breach, and the processor could be liable for any fraud committed using breached card information, Friedman states. Heartland also could see some fallout from merchant reluctance to use the processor because of breach concerns, contending with an ailing economy are other factors, Friedman writes. Moreover, the extent of the breach is unknown, Turrinelli says. "There remains a great deal of uncertainty, in our opinion, as to the scope and impact of this breach," Turrinelli states. While he expects Heartland will need to negotiate a settlement with the card brands, the larger concern "remains the long-term impact that this event could have on the company's ability to attract new merchants and retain the business of existing clients, both as a result of the publicity this has received and of competitive actions." But, Turrinelli is not willing to dismiss Heartland's viability. "We may also be overreacting to those risks, and the previous evidence is that few events of this nature result in long-term damage to companies," a topic that investors have discussed frequently, he says. Heartland's shares were trading earlier today at $7.99, having opened at $8.20. Heartland's stock closed at $14.11 on Jan. 20, but by Jan. 22 it closed at 8.18. A Heartland spokesperson has made no statement about the company's liability.
