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NCR (NCR) Up 5.3% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for NCR (NCR - Free Report) . Shares have added about 5.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NCR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

NCR Q2 Earnings Surge 130% Y/Y, Cardtronics Buyout Boosts Revenues

NCR reported second-quarter 2021 results on Tuesday, wherein the non-GAAP earnings came in line with the Zacks Consensus Estimate, while revenues surpassed the same. The company’s quarterly non-GAAP earnings of 62 cents per share came in line with the Zacks Consensus Estimate and soared 129.6% year over year on higher revenues and cost reductions.

The company’s revenues of $1.68 billion topped the consensus mark of $1.62 billion. The top-line figure also increased 13% year over year on a reported basis, mainly driven by revenue contribution from the recently-acquired Cardtronics business, along with solid growth across the company’s banking, retail and hospitality segments.

Quarter Details

Banking revenues increased 6% year over year to $809 million, primarily on higher software and services revenues, partially offset by lower ATM hardware sales. Cardtronics contributed $32 million to the Banking division’s revenues, representing an approximately 4% increase to the segment’s top-line growth.

Retail revenues increased 19% to $576 million, chiefly on growth in point-of-sale and self-checkout revenues across its food-drug-merchandise and convenience-fuel-retail customers.

Hospitality revenues grew 34% to $215 million, primarily driven by an increase in point-of-sale revenues across the company’s enterprise and small-and-medium business customers.

The company’s Digital Banking Solution continued witnessing solid momentum, with revenues increasing 8% year over year to $129 million. Digital banking registered users climbed 11%, year on year, to 26.2 million.

Margins

Non-GAAP gross profit of $472 million was up 23.9% year over year. Non-GAAP gross margin expanded 240 basis points (bps) to 28.1%, primarily driven by higher revenues and improved productivity, partially muted by elevated supply-chain costs.

Non-GAAP operating expenses flared up 12.8% year on year to $299 million, chiefly due to the company’s planned increase in research and development costs related to higher strategic investments.

Non-GAAP operating income increased to $173 million from the year-ago quarter’s $116 million. Non-GAAP operating margin expanded 250 bps to 10.3% from the year-earlier quarter’s 7.8%.

Other Financial Details

NCR ended the June-end quarter with cash and cash equivalents of $449 million compared with the $319million reported during the March-end quarter.

Free cash inflow totaled $142 million compared with the prior quarter’s $160 million. Net cash provided by operating activities was $155 million during the second quarter. During the first half of 2021, the company generated operating and free cash flows of $310 million and $235 million, respectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -17.78% due to these changes.

VGM Scores

Currently, NCR has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NCR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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