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Momentum

NCR Corporation (NCR)

If you’ve been around the markets long enough, you may remember this company as National Cash Register.  Back in the 1800’s, they were in the business of making quality mechanical cash registers that were cutting edge and helped merchants make transactions more efficient.

In the new age, they have not only evolved to meet the current needs of companies around the world, they have also thrived and created a new image and mission, while sticking to their roots of efficiency. 

For a company that is over 125 years old, NCR may still have some growth and momentum left in it. Recently, they reported stellar financial results for the fourth quarter of 2011. NCR saw revenue of $1.64 billion, which was a 17 percent jump from the fourth quarter of 2010, on both an actual and a constant currency basis.  They reported strong cash flow growth, with operating cash flow of $270 million and free cash flow of $229 million.

NCR may be an old dog with some new tricks yet to come.

Company Description & Developments
NCR is at the center of the self-service revolution, strategically poised between consumers who demand fast, easy and convenient options.   They are in many ways a “transaction facilitator.”   Their main products are self-service kiosks, point-of-sale terminals, ATMs, check processing systems, barcode scanners, and business consumables for all types of companies.  They also provide IT maintenance support services. NCR was granted the patent for the electronic signature capture back in 2003.

As consumers strengthen and more of our world goes digital, NCR may have some more time to bask in the sun. 

They recently sold their entertainment division to Coinstar, which was part of the Verizon / Redbox partnership and a win for NCR.  They key there was not so much in the profits from the sale, but in the management of those kiosks.  Moving forward, their growth depends on more transactions, further automation of those transactions and partnerships with willing businesses; all of which seem to be the trend as NCR is continuing to sign on new customers around the world.

Another attractive statistic was that they showed over a billion dollars in backlog business, up 14% from the prior period at their last earnings report.  This shows continued demand for their business and a steady income stream for months to come.

Financial Profile
NCR is a mid-cap (3.34 billion) company that is trading at about 70 times trailing earnings (P/E).  This makes it a bit expensive when you compare it to the broad market average for now.  Expectations are calling for that number to drop below 10 with no change in price over the next year according to Zacks Consensus Estimates.

NCR became a Zacks Rank 1 strong buy on February 9th after their strong results on February 7th.   

The technology company reported a quarterly sales increase of 17% at their last earnings report.  Annual sales were up 16.5% compared to Q42010 with total sales of roughly 4.8 billion in FY2010.  NCR earnings leapt from a 21 cent loss to an 83 cent profit from FY2009 to FY2010; they made $2.18 in 2011.  NCR is expected to earn $2.41 in FY2012 according to the Zacks Consensus Estimate. 

Earnings Estimates
The majority of analysts raised estimates higher for the coming quarters as well as FY2011 and FY2012 over the past 30 days.  Three analysts out of 10 lowered estimates for Q12012.  NCR will report Q12012 results on April 26th.  Expectations are for NCR to generate $0.36 in income this quarter.  Of the 10 analysts who cover NCR, the consensus is for the company to grow earnings by 25% in the current year (FY2012) and roughly 8.5% in FY2013. 

In terms of the magnitude of analyst estimate trends, we are seeing all of the consensus estimates higher than they were 90 days ago for the current and next quarters as well as FY2012 and FY2013. 

NCR beat estimates last quarter by 14% and had beat in the prior two quarters.  For Q12011, they had a huge miss of 76%. 

Market Performance & Technicals
NCR struggled a bit in the last half of 2011.  In January, share began their upward march and started gaining real momentum in the past 3 weeks leading up to their report in early February.

After the positive results, the stock managed to break into new 52 week high territory and topped out at $21.55 before backing off a bit.

NCR is now above its 50 and 200 day moving averages of $17.46 and $18.04 respectively.  Being that the 200 is still on top of the 50, that tells us the sideways trend quickly reversed and may not be as strong.  There should be support at the $19 level.

NCR has exceeded the S&P 500’s performance by over 10% in the past year and over 10% in the past 3 months.  With its recent run-up, NCR is ahead of the S&P by over 22% in the last 30 days alone!  Remember that NCR will be closely tied to consumer health and spending habits and will respond accordingly to data in those areas. 

Jared A Levy is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Whisper Trader Service.

 

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