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Why NCR Corp. Stock Is Soaring Today

By Timothy Green – Oct 26, 2016 at 6:26AM

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An earnings beat and a guidance boost provided a one-two punch that sent the stock higher.

Image source: NCR Corp.

What happened

Shares of NCR Corp. (NCR 0.41%), a provider of consumer transaction technologies, jumped on Wednesday following the company's third-quarter report. NCR handily beat analyst estimates for both revenue and earnings, which sent the stock up about 18% by 11:45 a.m.

So what

NCR reported quarterly revenue of $1.68 billion, up 4% year over year and $50 million higher than the average analyst estimate. Adjusted for currency and divestitures, revenue rose at a faster 10% rate. NCR recorded adjusted growth across its entire portfolio of products, with software revenue up 7%, services revenue up 6%, and hardware revenue up 16%.

NCR produced non-GAAP (adjusted) earnings per share of $0.87, up from $0.78 during the prior-year period and $0.06 better than what analysts were expecting. The company managed to keep operating expenses roughly flat on a year-over-year basis, which led to a GAAP operating margin of 11.3%, up from 10.4% during the third quarter of 2015. A higher tax rate largely offset this margin expansion, but a lower share count due to share repurchases boosted the per-share numbers.

NCR CEO Bill Nuti summed up the company's third quarter:

We delivered an impressive third quarter that included top line growth across all our business segments as well as strong cash flow generation. Software revenue growth accelerated due to solid growth in cloud and software license. In our Services business, revenues continue to grow and we are hard at work executing efficiency programs that will drive improved customer success and margin performance over the long-term. Hardware had a terrific quarter as we began delivering our new ATM and Branch products, while store transformation momentum continued to drive self-checkout volumes.

Now what

In addition to beating estimates for the third quarter, NCR raised its full-year revenue and earnings guidance. The company now expects to produce revenue in the range of $6.47 billion to $6.5 billion, up from a previous guidance of $6.325 billion to $6.4 billion. Higher expected revenue in all segments and a lower negative impact from currency are the drivers behind the guidance boost.

Non-GAAP EPS is now expected to be between $2.97 and $3.02 for the full year, up from previous guidance of $2.90 to $3.00. NCR also reaffirmed its free cash flow guidance, expecting to produce between $425 million and $475 million for the full year.

Timothy Green has no position in any stocks mentioned. The Motley Fool recommends NCR. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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