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NCR Corp. (NCR) Beats on Q2 Earnings; Raises FY16 View
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NCR Corporation reported better-than-expected second-quarter 2016 results. The company’s non-GAAP earnings (excluding acquisition-related costs, amortization of intangibles and other one-time items) of 72 cents per share beat the Zacks Consensus Estimate of 65 cents. Also, reported earnings increased from 66 cents per share in the year-ago quarter.
NCR’s revenues of $1.620 billion beat the Zacks Consensus Estimate of $1.555 million and increased 1% on a year-over-year basis. Also, on a constant currency basis, revenues were up 4% year over year.
Product revenues were down 3.8% on year-over-year basis whereas service revenues went up 4.8% in the quarter.
In the reported 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 3% to $452 million. Services revenues increased 6% to $574 million, whereas Hardware revenues declined 5% on a year-over-year basis to $594 million.
Non-GAAP gross margin was 28.7%, down 20 basis points (bps) from the year-ago quarter, mainly due to a decrease in Hardware revenues.
Income from operations on a non-GAAP basis was $207 million, up from $200 million a year ago. Operating margin, as a percentage of revenues, increased 31 bps on a year-over-year basis, primarily due to the impact of the settlement of NCR's UK London pension plan in the second quarter of 2015. Also, lower operating expenses as a percentage of revenues positively impacted operating results.
Non-GAAP net income from continuing operations was $111 million compared with $113 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 $332 million, down from $333 million in the previous quarter. Receivables were $1.36 billion compared with $1.31 billion in the previous quarter. The company had a long-term debt of $3.19 billion in the quarter.
Net cash provided by operating activities was $121 million. Free cash flow in the quarter was $55 million. NCR repurchased roughly 1.4 million shares worth $37 million during the quarter.
Guidance
NCR raised its full-year 2016 guidance. The company now expects revenues to be in a range of $6.325 billion–$6.400 billion (previously $6.25 billion–$6.35 billion). The Zacks Consensus Estimate is pegged at $6.274 billion.
The company continues to expect non-GAAP earnings per share for full-year 2016 to range between $2.90 and $3.00. The Zacks Consensus Estimate is pegged at $2.94.
Coming to the third-quarter outlook, NCR expects revenues in the range of $1.62 billion to $1.64 billion. The Zacks Consensus Estimate stands at $1.588 billion.
The company expects non-GAAP earnings per share for the third quarter to range between 77 cents and 82 cents. The Zacks Consensus Estimate is pegged at 86 cents.
NCR reported encouraging second-quarter 2016 results wherein the top and bottom lines surpassed the Zacks Consensus Estimate. The company raised its full-year 2016 revenue guidance and provided an encouraging third quarter revenue outlook.
Also, NCR’s growing exposure in the ATM and self-service kiosk spaces 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 Incorporated (DBD - Free Report) and HP Inc. (HPQ - Free Report) , and a high debt burden remain concerns.
Currently, NCR has a Zacks Rank #4 (Sell).
A better-ranked stock in the technology space is Box, Inc. (BOX - Free Report) , carrying a Zacks Rank #1 (Strong Buy)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
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NCR Corp. (NCR) Beats on Q2 Earnings; Raises FY16 View
NCR Corporation reported better-than-expected second-quarter 2016 results. The company’s non-GAAP earnings (excluding acquisition-related costs, amortization of intangibles and other one-time items) of 72 cents per share beat the Zacks Consensus Estimate of 65 cents. Also, reported earnings increased from 66 cents per share in the year-ago quarter.
Quarter in Detail
NCR’s revenues of $1.620 billion beat the Zacks Consensus Estimate of $1.555 million and increased 1% on a year-over-year basis. Also, on a constant currency basis, revenues were up 4% year over year.
Product revenues were down 3.8% on year-over-year basis whereas service revenues went up 4.8% in the quarter.
In the reported 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 3% to $452 million. Services revenues increased 6% to $574 million, whereas Hardware revenues declined 5% on a year-over-year basis to $594 million.
Non-GAAP gross margin was 28.7%, down 20 basis points (bps) from the year-ago quarter, mainly due to a decrease in Hardware revenues.
Income from operations on a non-GAAP basis was $207 million, up from $200 million a year ago. Operating margin, as a percentage of revenues, increased 31 bps on a year-over-year basis, primarily due to the impact of the settlement of NCR's UK London pension plan in the second quarter of 2015. Also, lower operating expenses as a percentage of revenues positively impacted operating results.
Non-GAAP net income from continuing operations was $111 million compared with $113 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 $332 million, down from $333 million in the previous quarter. Receivables were $1.36 billion compared with $1.31 billion in the previous quarter. The company had a long-term debt of $3.19 billion in the quarter.
Net cash provided by operating activities was $121 million. Free cash flow in the quarter was $55 million. NCR repurchased roughly 1.4 million shares worth $37 million during the quarter.
Guidance
NCR raised its full-year 2016 guidance. The company now expects revenues to be in a range of $6.325 billion–$6.400 billion (previously $6.25 billion–$6.35 billion). The Zacks Consensus Estimate is pegged at $6.274 billion.
The company continues to expect non-GAAP earnings per share for full-year 2016 to range between $2.90 and $3.00. The Zacks Consensus Estimate is pegged at $2.94.
Coming to the third-quarter outlook, NCR expects revenues in the range of $1.62 billion to $1.64 billion. The Zacks Consensus Estimate stands at $1.588 billion.
The company expects non-GAAP earnings per share for the third quarter to range between 77 cents and 82 cents. The Zacks Consensus Estimate is pegged at 86 cents.
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 second-quarter 2016 results wherein the top and bottom lines surpassed the Zacks Consensus Estimate. The company raised its full-year 2016 revenue guidance and provided an encouraging third quarter revenue outlook.
Also, NCR’s growing exposure in the ATM and self-service kiosk spaces 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 Incorporated (DBD - Free Report) and HP Inc. (HPQ - Free Report) , and a high debt burden remain concerns.
Currently, NCR has a Zacks Rank #4 (Sell).
A better-ranked stock in the technology space is Box, Inc. (BOX - Free Report) , carrying a Zacks Rank #1 (Strong Buy)
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>