A month has gone by since the last earnings report for NCR Corporation . Shares have lost about 17.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NCR Q2 Earnings Top, Revenues Miss,'17 View Same
NCR reported mixed results for the second quarter of 2017. The company’s non-GAAP earnings (excluding restructuring, acquisition-related expenses and other one-time items) from continuing operations of $0.80 per share surpassed the Zacks Consensus Estimate of $0.75 and surged 11.1% year over year.
Quarterly earnings also came ahead of the company’s guided range of $0.72–$0.77. The robust bottom-line performance was primarily driven efficient cost management and a lower share count.
Quarter in Detail
The company’s revenues of $1.593 billion missed the Zacks Consensus Estimate of $1.612 billion and decreased 1.7% on a year-over-year basis. On a constant currency basis (i.e. excluding FX impact and IPS business divesture), revenues were up 3% year over year.
The company’s product revenues came in at $618 million, down 8.6% from the year-ago-quarter. However, service revenues increased 3.3% year over year and came in at $975 million.
During second-quarter 2016, NCR modified its reportable segments to reflect changes in its reporting structure. The new reportable segments are Software, Services and Hardware segments.
The company’s Software revenues on a reported basis were up 3% to $464 million. The increase was primarily due to a 9% and 5% increase in Cloud and Professional Services revenues, respectively. Nonetheless, Software license was down 6%. Software maintenance revenues were flat year over year.
Services revenues increased 2% to $588 million on a reported basis. On a constant currency basis Services revenues increased 4%. The increase was primarily due to hardware maintenance growth.
Hardware revenues however decreased 9% year over year on a reported basis to $541 million. The segment’s, revenues from ATM and IPS declined 21% and 91%, respectively, while that from SCO and POS surged 37% and 18%, respectively. The increase in SCO and POS revenues was primarily due to store transformation growth during the quarter. On a constant currency basis, Hardware revenues increased 1%.
Non-GAAP gross profit for the quarter increased 3% and came in at $479 million, primarily due to strong execution as a result of strategic focus on business transformation, a positive revenue mix, efficiency and scale gains. Also, the non-GAAP gross margin was 30.1%, up from 28.7% reported in the year-ago quarter.
Income from operations on a non-GAAP basis was $215 million, up from $207 million a year ago. Also, operating margin expanded 70 bps on a year-over-year basis, primarily due to strong execution as well as better productivity.
Non-GAAP operating expenses during the quarter came in at $264 million, reflecting an increase from $258 million in the year-ago quarter.
Non-GAAP net income from continuing operations was $122 million compared with $111 million in the year-ago quarter.
Balance Sheet & Cash Flow
The ATM and POS manufacturer exited the quarter with cash and cash equivalents of approximately $377 million, down from $401 million in the previous quarter. Receivables were $1.32 billion compared with $1.29 billion in the previous quarter.
However, NCR has a highly-leveraged balance sheet. The company ended the quarter with $3 billion of long-term debt in its book.
In the second quarter, the company generated operating cash flow of $95 million and free cash flow was $18 million.
The company did not repurchase any share in the quarter under review. However, during the six months ended Jun 30, 2017, the company repurchased $350 million of its common stock.
Guidance
NCR reiterated its revenue and earnings outlook for 2017. However, the third-quarter guidance was slightly disappointing.
For the year, the company continues to anticipate revenues in the range of $6.63–$6.75 billion, representing year-over-year growth of 1% to 3% on a reported basis and 4% to 6% at adjusted constant currency.
Non-GAAP earnings per share are expected in the range of $3.32–$3.42. The company continues to expect operating cash flow in the range of $805 million to $830 million and free cash flow between $500 million and $525 million.
Coming to the third-quarter outlook, NCR expects revenues in the range of $1.66–$1.70 billion. The company expects non-GAAP earnings per share for the third quarter in the range of $0.88–$0.93.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
NCR Corporation Price and Consensus
VGM Scores
At this time, NCR's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than growth investors.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
Image: Bigstock
Why Is NCR Down 17.7% Since the Last Earnings Report?
A month has gone by since the last earnings report for NCR Corporation . Shares have lost about 17.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
NCR Q2 Earnings Top, Revenues Miss,'17 View Same
NCR reported mixed results for the second quarter of 2017. The company’s non-GAAP earnings (excluding restructuring, acquisition-related expenses and other one-time items) from continuing operations of $0.80 per share surpassed the Zacks Consensus Estimate of $0.75 and surged 11.1% year over year.
Quarterly earnings also came ahead of the company’s guided range of $0.72–$0.77. The robust bottom-line performance was primarily driven efficient cost management and a lower share count.
Quarter in Detail
The company’s revenues of $1.593 billion missed the Zacks Consensus Estimate of $1.612 billion and decreased 1.7% on a year-over-year basis. On a constant currency basis (i.e. excluding FX impact and IPS business divesture), revenues were up 3% year over year.
The company’s product revenues came in at $618 million, down 8.6% from the year-ago-quarter. However, service revenues increased 3.3% year over year and came in at $975 million.
During second-quarter 2016, NCR modified its reportable segments to reflect changes in its reporting structure. The new reportable segments are Software, Services and Hardware segments.
The company’s Software revenues on a reported basis were up 3% to $464 million. The increase was primarily due to a 9% and 5% increase in Cloud and Professional Services revenues, respectively. Nonetheless, Software license was down 6%. Software maintenance revenues were flat year over year.
Services revenues increased 2% to $588 million on a reported basis. On a constant currency basis Services revenues increased 4%. The increase was primarily due to hardware maintenance growth.
Hardware revenues however decreased 9% year over year on a reported basis to $541 million. The segment’s, revenues from ATM and IPS declined 21% and 91%, respectively, while that from SCO and POS surged 37% and 18%, respectively. The increase in SCO and POS revenues was primarily due to store transformation growth during the quarter. On a constant currency basis, Hardware revenues increased 1%.
Non-GAAP gross profit for the quarter increased 3% and came in at $479 million, primarily due to strong execution as a result of strategic focus on business transformation, a positive revenue mix, efficiency and scale gains. Also, the non-GAAP gross margin was 30.1%, up from 28.7% reported in the year-ago quarter.
Income from operations on a non-GAAP basis was $215 million, up from $207 million a year ago. Also, operating margin expanded 70 bps on a year-over-year basis, primarily due to strong execution as well as better productivity.
Non-GAAP operating expenses during the quarter came in at $264 million, reflecting an increase from $258 million in the year-ago quarter.
Non-GAAP net income from continuing operations was $122 million compared with $111 million in the year-ago quarter.
Balance Sheet & Cash Flow
The ATM and POS manufacturer exited the quarter with cash and cash equivalents of approximately $377 million, down from $401 million in the previous quarter. Receivables were $1.32 billion compared with $1.29 billion in the previous quarter.
However, NCR has a highly-leveraged balance sheet. The company ended the quarter with $3 billion of long-term debt in its book.
In the second quarter, the company generated operating cash flow of $95 million and free cash flow was $18 million.
The company did not repurchase any share in the quarter under review. However, during the six months ended Jun 30, 2017, the company repurchased $350 million of its common stock.
Guidance
NCR reiterated its revenue and earnings outlook for 2017. However, the third-quarter guidance was slightly disappointing.
For the year, the company continues to anticipate revenues in the range of $6.63–$6.75 billion, representing year-over-year growth of 1% to 3% on a reported basis and 4% to 6% at adjusted constant currency.
Non-GAAP earnings per share are expected in the range of $3.32–$3.42. The company continues to expect operating cash flow in the range of $805 million to $830 million and free cash flow between $500 million and $525 million.
Coming to the third-quarter outlook, NCR expects revenues in the range of $1.66–$1.70 billion. The company expects non-GAAP earnings per share for the third quarter in the range of $0.88–$0.93.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
NCR Corporation Price and Consensus
NCR Corporation Price and Consensus | NCR Corporation Quote
VGM Scores
At this time, NCR's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than growth investors.
Outlook
Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.