We reiterate our Neutral recommendation on
MICROS Systems Inc.
) following mixed first-quarter results. While the top line
surpassed the Zacks Consensus Estimate, the bottom line missed
the consensus mark. The stock retains a Zacks Rank #3, which is
equivalent to a short-term Hold rating. Moreover, a volatile
economic scenario and the company's European exposure keep us on
Why the Reiteration?
On Oct 24, MICROS reported first-quarter of fiscal 2014 results
wherein revenues increased 4.9% year over year to $314.7 million.
The year-over-year improvement in revenues was primarily
attributed to strong demand across the U.S. and Canada. Earnings,
on the other hand, declined 13.2% from the year-ago quarter to 46
cents per share.
The company's wide exposure in the retail segment is a key growth
driver. The retail industry ranks second among all U.S.
industries, and its annual sales turnover is more than 12% of the
total trade volume of all U.S.-based businesses. With a
comprehensive portfolio for retail solutions, we believe MICROS
is well positioned to capitalize on the growing opportunity.
Additionally, MICROS' strategic steps to increase shareholder
value through share repurchases are encouraging. During the first
quarter of fiscal 2014, the company spent around $91.6 million to
buy back 1.9 million shares for an average price of $49.52 per
share. These continued share buybacks are likely to boost
earnings, going forward.
MICROS expanded its product suites and geographical reach with
acquisitions over time. With the acquisition of Torex Retail
Holdings, Ltd., Fortech Italia, TIG Global and Fry Inc., the
company is expected to boost its financial performance, going
forward. Moreover, these acquisitions also give the company a
major competitive edge and strengthen its market position.
On the flip side, the company is facing tough competition from
the likes of Square, Revel,
), which are providing mobile and tablet-based offerings for the
hospitality sector and cannibalizing the legacy POS workstations.
Hence, MICROS being a hardware-based POS solutions provider will
lose out on market share. Moreover, the company's European
exposure and a sluggish macro-economic environment are the other
headwinds, going forward.
Currently, MICROS has a Zacks Rank #3 (Hold).
) is a better-ranked stock in the technology sector with a Zacks
Rank #2 (Buy).
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