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NCR Corp. (NCR) Q3 Earnings & Revenues Top, Guides Well
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NCR Corporation reported better-than-expected third-quarter 2016 results. The company’s non-GAAP earnings (excluding acquisition-related costs, amortization of intangibles and other one-time items) of 87 cents per share beat the Zacks Consensus Estimate of 81 cents. Also, reported earnings increased from 78 cents per share in the year-ago quarter.
NCR’s revenues of $1.677 billion beat the Zacks Consensus Estimate of $1.629 million and increased 3.9% on a year-over-year basis. Also, on a constant currency basis, revenues were up 10% year over year.
Product revenues were up 2.9% on a year-over-year basis whereas service revenues went up 4.8% in the quarter.
In its second quarter, NCR modified its reportable segments to reflect changes in the reporting structure of the organization. The new reportable segments are Software, Services and Hardware segments.
The company’s total Software revenue on a reported basis was up 8% to $468 million. The year-over-year increase in software revenues was primarily due to 25%, 7% and 7% increase in Software license, Software Maintenance and Cloud revenues, respectively.
Services revenues increased 5% to $591 million whereas Hardware revenues were almost flat on a year-over-year basis and came in at $618 million.
Non-GAAP gross profit for the quarter increased 3.8% and came in at $491 million, primarily due to growth in Software and Services revenues. However, non-GAAP gross margin was 29.3%, down 4 basis points (bps) from the year-ago quarter.
Income from operations on a non-GAAP basis was $230 million, up from $214 million a year ago. Operating margin, as a percentage of revenues, increased 44 bps on a year-over-year basis, primarily due to higher software revenues and increase in Service margins rate. Also, lower operating expenses as a percentage of revenues positively impacted operating results.
Non-GAAP net income from continuing operations was $135 million compared with $134 million in the year-ago quarter.
Balance Sheet & Cash Flow
NCR has a highly leveraged balance sheet. The ATM and POS manufacturer exited the quarter with cash and cash equivalents of approximately $318 million, down from $332 million in the previous quarter. Receivables were $1.39 billion compared with $1.36 billion in the previous quarter. The company had a long-term debt of $3.03 billion in the quarter.
Net cash provided by operating activities was $225 million. Free cash flow in the quarter was $153 million. NCR did not repurchase any shares during the quarter.
Guidance
NCR raised its full-year 2016 guidance. The company now expects revenues to be in a range of $6.47 billion–$6.50 billion (previously $6.325 billion–$6.400 billion). The Zacks Consensus Estimate is pegged at $6.377 billion.
The company now expects non-GAAP earnings per share for full-year 2016 to range between $2.97 and $3.02 (previously $2.90 and $3.00 per share). The Zacks Consensus Estimate is pegged at $2.95.
The company continues to expect net cash provided by operating activities to be in the range of $675 million to $725 million and free cash flow to be $425 million to $475 million.
Coming to the fourth-quarter outlook, NCR expects revenues in the range of $1.729 billion to $1.759 billion. The Zacks Consensus Estimate stands at $1.676 billion.
The company expects non-GAAP earnings per share for the third quarter to range between $1.01 per share to $1.06 per share. The Zacks Consensus Estimate is pegged at $1.04 per share.
NCR reported encouraging third-quarter 2016 results wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Also, both revenues and earnings increased on a year-over-year basis, primarily due to higher Software and Service revenues. The company raised its full-year 2016 revenue guidance and provided an encouraging fourth quarter revenue outlook.
Also, NCR’s growing exposure in the ATM and self-service kiosk space is encouraging, given the tremendous growth prospects in the respective markets. Continuous product launches, growing popularity of its self-service offerings and synergies from acquisitions are the catalysts. Continuous deal wins also drive growth. Moreover, NCR strengthened its position in the POS market through the integration of Radiant Systems.
However, softness in the ATM business in mature markets, competition from Diebold Inc. (DBD - Free Report) and HP Inc. (HPQ - Free Report) , and a high debt burden remain concerns.
Box has a long-term expected earnings growth rate of 76.86%.
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NCR Corp. (NCR) Q3 Earnings & Revenues Top, Guides Well
NCR Corporation reported better-than-expected third-quarter 2016 results. The company’s non-GAAP earnings (excluding acquisition-related costs, amortization of intangibles and other one-time items) of 87 cents per share beat the Zacks Consensus Estimate of 81 cents. Also, reported earnings increased from 78 cents per share in the year-ago quarter.
Quarter in Detail
NCR’s revenues of $1.677 billion beat the Zacks Consensus Estimate of $1.629 million and increased 3.9% on a year-over-year basis. Also, on a constant currency basis, revenues were up 10% year over year.
Product revenues were up 2.9% on a year-over-year basis whereas service revenues went up 4.8% in the quarter.
In its second quarter, NCR modified its reportable segments to reflect changes in the reporting structure of the organization. The new reportable segments are Software, Services and Hardware segments.
The company’s total Software revenue on a reported basis was up 8% to $468 million. The year-over-year increase in software revenues was primarily due to 25%, 7% and 7% increase in Software license, Software Maintenance and Cloud revenues, respectively.
Services revenues increased 5% to $591 million whereas Hardware revenues were almost flat on a year-over-year basis and came in at $618 million.
Non-GAAP gross profit for the quarter increased 3.8% and came in at $491 million, primarily due to growth in Software and Services revenues. However, non-GAAP gross margin was 29.3%, down 4 basis points (bps) from the year-ago quarter.
Income from operations on a non-GAAP basis was $230 million, up from $214 million a year ago. Operating margin, as a percentage of revenues, increased 44 bps on a year-over-year basis, primarily due to higher software revenues and increase in Service margins rate. Also, lower operating expenses as a percentage of revenues positively impacted operating results.
Non-GAAP net income from continuing operations was $135 million compared with $134 million in the year-ago quarter.
Balance Sheet & Cash Flow
NCR has a highly leveraged balance sheet. The ATM and POS manufacturer exited the quarter with cash and cash equivalents of approximately $318 million, down from $332 million in the previous quarter. Receivables were $1.39 billion compared with $1.36 billion in the previous quarter. The company had a long-term debt of $3.03 billion in the quarter.
Net cash provided by operating activities was $225 million. Free cash flow in the quarter was $153 million. NCR did not repurchase any shares during the quarter.
Guidance
NCR raised its full-year 2016 guidance. The company now expects revenues to be in a range of $6.47 billion–$6.50 billion (previously $6.325 billion–$6.400 billion). The Zacks Consensus Estimate is pegged at $6.377 billion.
The company now expects non-GAAP earnings per share for full-year 2016 to range between $2.97 and $3.02 (previously $2.90 and $3.00 per share). The Zacks Consensus Estimate is pegged at $2.95.
The company continues to expect net cash provided by operating activities to be in the range of $675 million to $725 million and free cash flow to be $425 million to $475 million.
Coming to the fourth-quarter outlook, NCR expects revenues in the range of $1.729 billion to $1.759 billion. The Zacks Consensus Estimate stands at $1.676 billion.
The company expects non-GAAP earnings per share for the third quarter to range between $1.01 per share to $1.06 per share. The Zacks Consensus Estimate is pegged at $1.04 per share.
NCR CORP-NEW Price, Consensus and EPS Surprise
NCR CORP-NEW Price, Consensus and EPS Surprise | NCR CORP-NEW Quote
Our Take
NCR reported encouraging third-quarter 2016 results wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Also, both revenues and earnings increased on a year-over-year basis, primarily due to higher Software and Service revenues. The company raised its full-year 2016 revenue guidance and provided an encouraging fourth quarter revenue outlook.
Also, NCR’s growing exposure in the ATM and self-service kiosk space is encouraging, given the tremendous growth prospects in the respective markets. Continuous product launches, growing popularity of its self-service offerings and synergies from acquisitions are the catalysts. Continuous deal wins also drive growth. Moreover, NCR strengthened its position in the POS market through the integration of Radiant Systems.
However, softness in the ATM business in mature markets, competition from Diebold Inc. (DBD - Free Report) and HP Inc. (HPQ - Free Report) , and a high debt burden remain concerns.
Currently, NCR has a Zacks Rank #3 (Hold).
A better-ranked stock in the technology space is Box, Inc. (BOX - Free Report) , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Box has a long-term expected earnings growth rate of 76.86%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>