Why NCR Corporation Shares Tumbled Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of NCR Corporation  (NYSE: NCR  ) fell more than 10% in Wednesday's early trading, then partially recovered to close down 6% after the company turned in solid first-quarter results, but lowered its full-year 2014 guidance.

So what: Quarterly revenue increased 8% to $1.52 billion, including 45% growth in software-related revenue to $395 million. This translated to adjusted earnings of $0.50 per diluted share. Analysts, on average, were only looking for earnings of $0.48 per share on sales of $1.52 billion.

However, NCR followed by reducing its 2014 top-line guidance, and now sees full-year revenue in the range of $6.75 billion to $6.85 billion, or year-over-year growth of roughly 10% to 12%. NCR had previously told investors to expects sales to increase 12% to 14%. Curiously, 2014 adjusted earnings per share are still expected to be roughly $3.00 to $3.10 -- though CEO Bill Nuti admitted they will likely "be at the lower end of this range based on what we are seeing today."

Analysts, for their part, were modeling 2014 earnings of $3.05 per share, but on revenue at the high end of NCR's expected range, at $6.85 billion.

Now what: Nuti blamed a "challenging market in Retail Solutions" for the guidance shortfall, which isn't ideal, but also doesn't mean NCR is a broken business. With shares currently trading at just 10 times the low end of NCR's expected 2014 earnings range, I think today's pullback could represent an attractive entry point for patient long-term investors.

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  • Report this Comment On May 01, 2014, at 1:45 PM, MrToad2 wrote:

    My thesis on NCR is that they should benefit greatly from major upgrades of both retail Point of Sale, POS, & ATM's to EMV standards...with the Target debacle and 95% of ATM's running expired Win XP. These themes have been mentioned in Fool articles. Yet price action, their guidance, comments on "challenging market in Retail Solutions," and no mention of EMV in the recent conference call disconfirm this thesis.

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