NCR Corp.
(
NCR
) is scheduled to release its third quarter 2012 results on
October 18, 2012. In the run up to the earnings release, we
notice some variation in analysts' estimates.
Second Quarter Recap
NCR posted second quarter 2012 earnings per share of 65 cents,
well above the Zacks Consensus Estimate of 59 cents.
NCR reported revenues of $1.41 billion in the second quarter,
up 11.0% from $1.27 billion in the year-ago quarter. Financial
services generated revenues of $783.0 million, up 7.4% from the
second quarter of 2011. Total orders improved 19.0% on a
year-over-year basis.
Quarterly net income stood at $67.0 million or 41 cents per
diluted share, compared with $45.0 million or 28 cents per
diluted share in the year-ago quarter.
Excluding special items like impairment, pension expense,
acquisition related transaction cost, and amortization and legal
settlement charges, non-GAAP income from continuing operations
was 65 cents per diluted share compared with 52 cents per diluted
share in the comparable prior-year quarter.
Guidance
The company's full-year 2012 revenue is expected to increase
in the range of 11.0% to 13.0% on a year-over-year basis. Income
from Operations (GAAP) is expected to be in the range of $362.0
million to $377.0 million for fiscal 2012.
GAAP diluted earnings per share are expected to range between
$1.45 and $1.52 and non-GAAP diluted earnings per share in the
$2.40 to $2.47 per diluted share range. The company expects other
expenses of around $40 million, net including interest expense in
2012.
Agreement of Analysts
One out of the 7 analysts providing estimates for the third
quarter raised the estimate over the last 30 days. However, for
the December quarter, one out of 8 analysts lowered the estimate,
while none moved in the opposite direction. For fiscal 2012, one
analyst made a downward revision in the last 30 days.
Analysts are of the opinion that the company has a sustainable
business model in place that will help them to drive its
long-term targets. Management is tightening its grip on the
financial services, hospitality (Radiant) and retail portfolios,
which will ultimately help them explore new markets and will also
help them to diversify their business model.
Moreover, the company is also concentrating on its core ATM
business and witnessing an improvement in business volume, as
regional banks are upgrading their ATMs. Radiant is also making a
contribution. This apart, the company is also strengthening its
grip on the German ATM and Point-of-Sale (POS) markets.
Although the company continues to witness a turnaround story
in Europe, but the situation looks particularly bleak in Western
Europe although the company is making considerable effort to
revive business here.
Magnitude of Estimate Revisions
The magnitude of revisions for the third quarter of 2012 is
minimal, since the company reported its second quarter results.
Overall, the Zacks Consensus Estimate for the upcoming quarter
has moved down by 4 cents over the last 90 days to 59 cents.
Again the estimate for the same period has remained unchanged
over a period of 30 days.
The estimate for fiscal 2012, declined by 1 cent over the last
90 days to $2.46, but has remained unchanged over the last 30
days. For 2013, it moved down by 9 cents to $2.63 over the last
90 days, and moved down by 2 cents over a period of 30 days to
$2.63.
Recommendation
NCR reported decent second quarter results, with revenues
improving across most of its business segments and geographical
regions. Also, 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, including significant cost saving.
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 needs to reduce its debt balance
to further improve its interest burden and come up with new
strategies to compete against
Diebold Inc
. (
DBD
).
The company has a Zacks #3 Rank, implying a short-term Hold
rating.The company has a Neutral recommendation.
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