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NCR Corp. (NCR - Analyst Report) is scheduled to release its third quarter 2012 results on October 18, 2012. In the run up to the earnings release, we notice some variation in analysts’ estimates.

Second Quarter Recap

NCR posted second quarter 2012 earnings per share of 65 cents, well above the Zacks Consensus Estimate of 59 cents.

NCR reported revenues of $1.41 billion in the second quarter, up 11.0% from $1.27 billion in the year-ago quarter. Financial services generated revenues of $783.0 million, up 7.4% from the second quarter of 2011. Total orders improved 19.0% on a year-over-year basis.

Quarterly net income stood at $67.0 million or 41 cents per diluted share, compared with $45.0 million or 28 cents per diluted share in the year-ago quarter.

Excluding special items like impairment, pension expense, acquisition related transaction cost, and amortization and legal settlement charges, non-GAAP income from continuing operations was 65 cents per diluted share compared with 52 cents per diluted share in the comparable prior-year quarter.

Guidance

The company’s full-year 2012 revenue is expected to increase in the range of 11.0% to 13.0% on a year-over-year basis. Income from Operations (GAAP) is expected to be in the range of $362.0 million to $377.0 million for fiscal 2012.

GAAP diluted earnings per share are expected to range between $1.45 and $1.52 and non-GAAP diluted earnings per share in the $2.40 to $2.47 per diluted share range. The company expects other expenses of around $40 million, net including interest expense in 2012.

Agreement of Analysts

One out of the 7 analysts providing estimates for the third quarter raised the estimate over the last 30 days. However, for the December quarter, one out of 8 analysts lowered the estimate, while none moved in the opposite direction. For fiscal 2012, one analyst made a downward revision in the last 30 days.

Analysts are of the opinion that the company has a sustainable business model in place that will help them to drive its long-term targets. Management is tightening its grip on the financial services, hospitality (Radiant) and retail portfolios, which will ultimately help them explore new markets and will also help them to diversify their business model.

Moreover, the company is also concentrating on its core ATM business and witnessing an improvement in business volume, as regional banks are upgrading their ATMs. Radiant is also making a contribution. This apart, the company is also strengthening its grip on the German ATM and Point-of-Sale (POS) markets.

Although the company continues to witness a turnaround story in Europe, but the situation looks particularly bleak in Western Europe although the company is making considerable effort to revive business here.

Magnitude of Estimate Revisions

The magnitude of revisions for the third quarter of 2012 is minimal, since the company reported its second quarter results. Overall, the Zacks Consensus Estimate for the upcoming quarter has moved down by 4 cents over the last 90 days to 59 cents. Again the estimate for the same period has remained unchanged over a period of 30 days.

The estimate for fiscal 2012, declined by 1 cent over the last 90 days to $2.46, but has remained unchanged over the last 30 days. For 2013, it moved down by 9 cents to $2.63 over the last 90 days, and moved down by 2 cents over a period of 30 days to $2.63.

Recommendation

NCR reported decent second quarter results, with revenues improving across most of its business segments and geographical regions. Also, EPS exceeded our expectation. This apart, the company witnessed an improvement in gross margin as a result of higher product and services sales, favorable customer and product mix, including significant cost saving.

The company has also provided decent fiscal year guidance and the company believes that it is well positioned to deliver good momentum across all its businesses.

With the restructuring plan in place, the integration of the Radiant system and favorable position in Germany, the company’s revenue is expected to increase going forward. Although the restructuring initiatives have begun impacting results and demand is picking up, we believe that the company will take some more time to come up with better results.

We believe that the company needs to reduce its debt balance to further improve its interest burden and come up with new strategies to compete against Diebold Inc. (DBD - Snapshot Report).

The company has a Zacks #3 Rank, implying a short-term Hold rating.The company has a Neutral recommendation.

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