NCR (NCR) Up 13.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for NCR (NCR). Shares have added about 13.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NCR due for a pullback? Before we dive into how investors and analysts have reacted as 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 Corporation Q1 Earnings & Revenues Miss Estimates

NCR Corporation reported first-quarter 2022 non-GAAP earnings of 33 cents, missing the Zacks Consensus Estimate of 64 cents per share.
The enterprise technology provider’s bottom line plunged 35.3% from 51 cents per share reported in the year-ago quarter.

For the first quarter of 2022, the company reported revenues of $1.86 billion, lagging the consensus mark of $1.92 billion. The top line witnessed a year-over-year surge of 21%, driven by contributions from the Cardtronics business, and solid growth across the company’s Payments, Digital Banking and Hospitality segments.

NCR progressed significantly with its strategic growth initiatives, which are transforming it into a software platform and payments company. The company’s recurring revenues improved 35% to $1.18 billion in the quarter under review.

However, the Russia-Ukraine conflict, inflation and the Omicron wave remained headwinds.

Quarterly Details

From first-quarter 2022, NCR changed its reporting segments to correspond with changes to its operating model, management structure and organizational responsibilities. The new reportable revenue segments are: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality.

Payments & Network revenues climbed 12% year over year to $299 million, primarily driven by merchant acquiring and Allpoint network (including the contributions of Cardtronics and newly acquired LibertyX business).

During the first quarter, Self-Service Banking revenues declined 3% to $611 million. The segment continued to witness strong momentum as a result of accelerated transformation toward adopting software-based solutions like ATM as-a-service solution.

Retail revenues rose 5% to $546 million, primarily on higher self-checkout revenues and point-of-sale revenues across its food-drug-merchandise and convenience-fuel-retail customers.

Hospitality revenues climbed 18% to $211 million, mainly driven by an increase in point-of-sale revenues across the company’s enterprise and small-and-medium business customers.

NCR’s Digital Banking Solution continued witnessing solid momentum, with revenues increasing 11% year over year to $136 million. Digital banking registered users remained flat year over year at 25.3 million.

Operating Details

Non-GAAP gross margin of $449 million was up 5.6% year over year. Non-GAAP gross margin rate contracted 340 basis points (bps) to 24.1%, primarily due to elevated component and freight costs, partially offset by price hikes.

Non-GAAP operating expenses increased 17% year on year to $325 million, mainly due to the company’s planned increase in research and development costs related to higher strategic investments and inclusion of Cardtronics expenses.

Adjusted EBITDA increased 5% year over year to $271 million. The adjusted EBITDA margin contracted 220 bps to 14.5%.

Non-GAAP operating income decreased to $124 million from the year-ago quarter’s $148 million. Non-GAAP operating margin contracted 290 bps to 6.7% from the year-earlier quarter’s 9.6%.

Balance Sheet & Other Details

NCR exited the March-end quarter with cash and cash equivalents of $412 million compared with $447 million reported during the December-end quarter.

Free cash outflow totaled $10 million compared with the prior quarter’s cash inflow of $100 million. Net cash provided by operating activities was $38 million in the first quarter.

Guidance

For the full-year 2022, NCR now anticipates revenues of approximately $8 billion, compared with the earlier guidance of $8-$8.2 billion.

The company now expects adjusted EBITDA in the band of $1.4-$1.5 billion, lower than the previous estimate of $1.5-$1.575 billion.

Non-GAAP diluted earnings are now projected to be $2.70-$3.20. compared with the prior range of $3.25-$3.55 per share.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -22.82% due to these changes.

VGM Scores

At this time, NCR has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, NCR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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