NCR Corporation (NCR - Free Report) surpassed the Zacks Consensus Estimate in all the trailing four quarters with an average positive earnings surprise of 11.1%. Notably, in first-quarter 2018, the company delivered a positive earnings surprise of 27.3%.
We believe NCR’s focus on growth of its cloud segment and modernization of services business are proving to be worthy, especially at a time when its ATM segment is not performing well. The company’s shift from the underperforming segment toward growth segments makes us believe that this stock can be retained by an investor for reaping benefits.
Let’s take a detailed look at the factors that are driving the company’s performance.
The demand for NCR’s point of sale (POS) solution is increasing among retailers and hospitality industries as it facilitates the automation of bill payment and accounting.
According to Global Market Insights, the global market size for POS terminals will reach $103.52 billion by 2023. Thus, NCR with its varied offerings of POS terminals and solutions is expected to capitalize on the growth opportunities in the market.
Additionally, NCR’s growing exposure in the self-service kiosk space is encouraging. NCR provides self-service kiosks for the financial services, retail, hospitality, travel and gaming industries. The kiosks are well equipped to support numerous retail self-service functions, including self-check in/out, bill payment and gift registries among others. We believe NCR with a wide range of solutions will continue to gain in this domain as well.
However, softness in its ATM business has largely impacted its revenue growth. With large customers across North America, India, the Middle East and Africa delaying their spending, NCR is facing a tough time in this segment. Additionally, slow conversion to Windows 10 is the other primary reason behind softness in the ATM business.
Moreover, the company has a highly leveraged balance sheet. Though it has a long-term debt of $3.04 billion, its cash and cash equivalents amounts to just $348 million at the end of first-quarter 2018. The weakness in its balance sheet is also an area of concern for the company.
Nevertheless, continuous product launches, growing popularity of its self-service offerings and synergies from acquisitions keep us optimistic about this Zacks Rank #3 (Hold) stock’s retention in investors’ portfolio.
Stocks to Consider
Some better-ranked technology stocks include NVIDIA (NVDA - Free Report) , The Ultimate Software Group, Inc. (ULTI - Free Report) and Micron Technology, Inc. (MU - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for NVIDIA, Ultimate Software Group and Micron is currently projected to be 10.3%, 21.7% and 8.2%, respectively.
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