Due to several headwinds, NCR Corporation 's NCR chances of offering favorable returns in the near term are slim. Hence, this is the best time to dump the stock.
The stock has lost 13.7% in the past three months, underperforming the industry , which has witnessed a gain of 0.32%. Let's delve deeper and try to find out what is taking this Zacks Rank #5 (Strong Sell) company down.
Estimates Moving South
Analysts have become increasingly bearish on the stock over the past couple of months. With four estimates moving down against no upward revision in the past 30 days, the Zacks Consensus Estimate for current-quarter earnings has declined from $1.11 per share to 86 cents.
The Zacks Consensus Estimate for current-year earnings declined from $3.37 per share to $3.14, over the same time frame.
NCR also lowered its revenue and earnings outlook for 2017 in third-quarter 2017 results. Additionally, the fourth-quarter guidance was disappointing.
For the year, the company now anticipates revenues in the range of $6.475-$6.525 billion, lower than previous guided range of $6.63-$6.75 billion. The Zacks Consensus Estimate is pegged at $6.68 billion. The lower revenue guidance was primarily due to weakness in the ATM market.
Non-GAAP earnings per share are now anticipated in the range of $3.10-$3.20, lower than the previous guided range of $3.32-$3.42. The Zacks Consensus Estimate is pegged at $3.37. The decrease in earnings per share was mainly due to lower ATM hardware and attached software licenses.
The company now expects operating cash flow in the range of $745-$775 million (previous guidance: $805-$830 million). Moreover, free cash flow is now anticipated to be between $440 million and $470 million (previous guidance: $500-$525 million). The decrease in the cash flow outlook was mainly due to lower revenues.
For the fourth quarter, NCR expects revenues in the range of $1.74-$1.79 billion. The Zacks Consensus Estimate is pegged at $1.93 billion.
The company expects non-GAAP earnings per share for the quarter in the range of 83-93 cents. The Zacks Consensus Estimate is pegged at $1.11 per share.
This makes us cautious about the company's near-term prospects.
Given the other downsides like low return on assets (ROA) and low return on capital (ROC), the stock looks very unappealing. NCR currently trades at a ROA of 7.3%, much lower than the industry average of 11.7%. Notably, the company has an ROC of 12.5% compared with the industry average of 18.3%.
NCR has a highly leveraged balance sheet. The company had a long-term debt position of $2.98 billion while had a cash and cash equivalents of just $405 million at the end of third-quarter 2017. Thus, it had to constantly generate adequate operating cash flow to service its debt.
Moreover, competition from Diebold Inc. DBD and HP Inc. HPQ remain concerns.
A Stock to Consider
A top-ranked stock in the broader technology is NVIDIA Corporation NVDA , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
NVIDIA has a long-term EPS growth rate of 11.2%.
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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 HP Inc. (HPQ): Free Stock Analysis Report NCR Corporation (NCR): Free Stock Analysis Report Diebold, Incorporated (DBD): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report To read this article on Zacks.com click here.