Back to top

Analyst Blog

NCR Corp. (NCR - Analyst Report) posted third quarter 2012 earnings per share of 64 cents, well above the Zacks Consensus Estimate of 59 cents.

Revenue

NCR reported revenues of $1.44 billion in the third quarter, up 5.5% from $1.36 billion in the year-ago quarter. Total revenue was positively impacted by the year-on-year increase in Financial Services, Hospitality and Emerging Industries revenue.

Financial services reported revenues of $791.0 million, up 3.0% from $770.0 million in the year-ago quarter. Improved performance in the Americas was offset to some extent by declines in the Asia Middle East Africa (AMEA).

Retail solutions revenue declined 9.6% year over year to $421.0 million in the quarter. American and European business incurred declines, which along with the negative effect of the movement in specialty retail and hospitality business affected the segment’s performance.

The Hospitality segment’s revenue soared a staggering 258.0% from year-ago quarter to $129.0 million in the reported quarter. Improved product volumes and services revenue in the Americas region bolstered the segment’s performance.

Emerging Industries segment reported revenue of $94.0 million, up 7.0% year over year. The improvement in the segment revenue can be attributed to improved AMEA performance, while weakness in the Americas theater somewhat offset the gains.

Operating Results

Gross margin in the quarter was 24.9% versus 22.0% in the year-ago quarter. The year-over-year upside in gross margin was fueled by higher product and services sales, efficient management, improved software revenues, and improvement in the core business and hardware margins.

NCR reported net income of $57.0 million or 35 cents per diluted share in the reported quarter, compared with $16.0 million or 14 cents per diluted share in the year-ago quarter. Excluding special items like impairment, pension expense, acquisition related transaction cost, amortization and legal settlement charges; non-GAAP income from continuing operations was 64 cents per diluted share compared with 57 cents per diluted share in the prior-year quarter.

Balance Sheet & Cash Flow

Net cash used by operating activities was $400.0 million during the third quarter of 2012, up from net cash usage of $6.0 million in the year-ago period. Cash from operating activities was negatively impacted by additional pension contributions.

NCR ended the quarter with $581.0 million in cash and cash equivalents versus a balance of $377.0 million as of June 30, 2012. Net capital expenditures of $43 million increased slightly from $27 million in the third quarter of 2011.

Guidance

The company forecasts fourth quarter 2012 non-pension operating income (NPOI) to be in the range of $172 million to $182 million, and fourth quarter 2012 income from operations to be in the range of $116 million to $126 million.

The company forecasts full year 2012 revenues to be up 11% to 13% over 2011, while the full year Income from Operations (GAAP) is projected to be between $355 million and $365 million. Diluted earnings per share on GAAP basis is expected to be in the range of $1.39 to $1.46 and non-GAAP diluted earnings per share is pegged between $2.40 and $2.47.

Recommendation

NCR reported decent third quarter results, with revenues improving across most of its business segments and geographical regions. Moreover, 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, and also as a result of high margin software and hardware revenue.

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 should 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.

Please login to Zacks.com or register to post a comment.