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NCR Earnings and Revenues Surpass Estimates in Q4, Rise Y/Y

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NCR Corporation’s (NCR - Free Report) fourth-quarter 2019 non-GAAP earnings of 85 cents per share surpassed the Zacks Consensus Estimate by 1.2%. On a year-over-year basis, the metric increased 1.2%.

The company’s revenues of $1.89 billion topped the consensus estimate of $1.73 billion. The figure increased 5% year over year on a reported basis and 6% in constant currency (CC).

Notably, the company completed the acquisition of Zynstra to bolster its next-generation store architecture.

Growth across each of the segments drove the top line. However, foreign currency fluctuations were an overhang.

NCR Corporation Price, Consensus and EPS Surprise

 

NCR Corporation Price, Consensus and EPS Surprise

NCR Corporation price-consensus-eps-surprise-chart | NCR Corporation Quote

Quarter Details

Banking revenues remained flat on a reported basis and increased 2% in CC, driven by strong demand for software and service solutions despite a partial shift of banking software to recurring revenues. Notably, NCR signed several deals in banking software during the quarter on a recurring basis.

For the year, banking revenues grew 13% year over year, driven by 33% growth in ATM hardware sales.

Retail revenues rose 10% on both reported basis and CC, driven by revenue contribution from JetPay and solid traction in self-checkout solution. Higher hardware maintenance activity and several new managed service contracts benefited the segment.

Hospitality revenues increased 5% on a reported basis as well as in CC, driven by higher cloud revenues from NCR Silver and Aloha products, payment revenues from the JetPay acquisition, and rise in point-of-sale revenues.

The company’s Digital Banking Solution witnessed solid growth. During the quarter, it signed 52 recurring contract deals that would have been an upfront payment in the past. The acquisition of D3 Technology in the prior quarter drove revenues for the business.

In Digital First Restaurant, NCR witnessed early success in Aloha Essentials — its bundle of software, services, hardware and payments. Notably, 80% of all SMB Aloha sites sold through its direct sales channel were sold as an Aloha Essentials subscription bundle.

Digital Connected Services continued to witness an expansion of the customer base.

Margins

Non-GAAP gross profit of $541 million was up 9.9% year over year. Non-GAAP gross margin expanded 120 basis points to 28.7%. Non-GAAP operating expenses were $324 million, up 15.3% due to higher employee-related and real estate costs.

Non-GAAP operating income of $217 million inched up 1.4% year over year.

Operating income for Banking grew 14% year over year, driven by a favorable mix for ATMs, and higher software and service revenues.

Operating income for the Retail segment rose 21% year over year, primarily driven by improved hardware profitability.

Operating income of the Hospitality segment decreased 45% due to difficult year over year comparison, pertaining to the presence of several large customer installations in the prior-year quarter. Also, continued investment in services support and payments were an overhang. However, improved hardware profitability provided relief.

Other Financial Details

Free cash flow was $296 million as compared with $57 million in the prior quarter.

Net cash provided by operating activities was $402 million.

2019 Highlights

For 2019, revenues increased 8% on a reported basis and 10% in CC. Banking, Retail and Hospitality revenues rose 10%, 6% and 3%, respectively, on a reported basis.

Non-GAAP earnings of $2.81 per share were up 7.3% year over year.

Outlook

For 2020, the company anticipates 0-1% year-over-year revenue growth.

Non-GAAP earnings per share are expected to be between $2.75 and $2.85.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the broader technology sector are CEVA, Inc. (CEVA - Free Report) , SYNNEX (SNX - Free Report) and Silicon Motion Technology Corporation (SIMO - Free Report) , all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rates for CEVA, SYNNEX and Silicon Motion are currently pegged at 20%, 10.37% and 7%, respectively.

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