What happened

Shares of software and hardware company NCR Corp. (VYX -1.08%) slumped on Friday following a mixed second-quarter report. NCR beat on earnings but missed analyst estimates for revenue, which was dragged down by currency and divestitures. As of 11:00 a.m. EDT, the stock was down about 9%.

So what

NCR reported second-quarter revenue of $1.59 billion, down 2% year over year and about $20 million short of the average analyst estimate. Revenue was up 3% excluding the negative impacts from currency exchange rates and the divestiture of the interactive printer solutions business.

NCR hardware.

Image source: NCR Corp.

Total software revenue rose 3% year over year, driven by a 9% increase in cloud revenue. Service revenue jumped 2%, while hardware revenue was down 9%. Excluding currency and divestitures, hardware revenue rose 1%, with double-digit growth in self-checkout and point-of-sale hardware offsetting weakness in ATM sales.

Non-GAAP EPS rose 13% year over year adjusted for currency to $0.80, beating the average analyst estimate by $0.04. Non-GAAP gross margin rose 150 basis points, while non-GAAP operating margin expanded 90 basis points.

Chairman and CEO Bill Nuti commented on the quarter: "The second quarter is a great example of the strength of NCR's transformed business model over the last decade. The diversity of our revenue streams and growing strength in software, particularly cloud, drove financial results that were in-line with our expectations and keep us on target to achieve our full year outlook."

Now what

NCR reaffirmed its full-year revenue, EPS, and cash flow guidance despite the slight revenue miss. The company sees revenue growing by 4% to 6% adjusted for currency, and non-GAAP EPS between $3.32 and $3.42. NCR expects cash from operating activities between $805 million and $830 million, with free cash flow between $500 million and $525 million.

With NCR barely missing analyst estimates for revenue, the near-10% decline in the stock seems like an overreaction, especially given shares trade for roughly 10 times free cash flow guidance.