We reiterate our Neutral recommendation on
MICROS Systems, Inc.
) as we believe that the risk-reward profile of the company is
currently balanced. We are optimistic on the company's strategic
contract wins and share repurchase initiatives, which are expected
to neutralize the effects of the clouded macro-economic conditions
and ominous competition prevailing in the industry.
The company's best-in-class services, well-diversified business
portfolio, long-term and steady working histories with its clients
are the key growth drivers which helped it establish itself in a
formidable position within the hotel information systems market.
Additionally, the company's newly introduced product ranges
including point-of-sale solution (POS), OPERA Enterprise Solution
(OES), Restaurant Enterprise Series (RES) and many other advanced
platforms are constantly supporting its businesses and setting the
stage for further growth.
Various strategic contract wins hold future pledge for MICROS.
The company confirmed winning a bunch of contracts from Carino's
Italian, Moran & Bewley's Hotel Group, Delaware North
Companies, Delta Hotels and Resorts, Aston Hotels & Resorts,
LLC, Rex Restaurant Associates, Delaware North Companies and many
more during fiscal 2012. We believe that these agreements are
likely to heighten the company's revenue stream in future.
Further, one aspect, which has forever been an integral part of
MICROS' total approach, is its desire to return optimum value to
its shareholders through buy back activities. During the first
quarter of fiscal 2012, the Board of Directors had approved a stock
buy-back program authorizing the company to repurchase up to 2.2
million shares over the next three years. Under this share
authorization program, the company repurchased nearly 1.3 million
shares during fiscal 2012 out of which 110,000 shares were bought
back in the fourth quarter of fiscal 2012.
However, the scenario is not really as bright as it appears as
certain issues still continue to be troublesome for the company.
Business for MICROS was adversely affected by the weak economic
condition. Weakened consumer spending and difficulties in obtaining
credit negatively prevented customers from acquiring or opening new
hospitality and retail venues. Although the economy is showing
signs of revival, customer spending is still quite low.
The company's significant portions of revenues came from its
international operations. Hence, it is highly exposed to foreign
currency fluctuation. In addition, the risk of strong competition
from various big and small industry players such as
PAR Technology Corporation
) would also affect MICROS' profitability moving ahead.
Hence, until the situation ameliorates and a brighter picture
appears on the scene, we consider it wise to maintain a sideline
stance on MICROS. In the short run, we have a Zacks #3 Rank on the
stock, which translates into a short-term 'Hold' rating.
MICROS SYS (MCRS): Free Stock Analysis Report
NCR CORP-NEW (NCR): Free Stock Analysis Report
(PAR): ETF Research Reports
PANASONIC CORP (PC): Free Stock Analysis Report
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