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Why Shares of NCR Jumped on Tuesday

By Lou Whiteman – May 7, 2019 at 2:03PM

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A takeover rumor catches Wall Street's attention.

What happened

Shares of NCR (NCR 0.29%) jumped as high as 16% on Tuesday afternoon after a report surfaced that the maker of point-of-sale and automated teller machines had received takeover interest from an unnamed buyer.

So what

NCR shares were briefly halted on Tuesday after Bloomberg reported that the company is working with a financial advisor to explore options after receiving an inquiry about a potential sale. The company spiked higher when trading resumed before falling back slightly, trading up about 10% on Tuesday afternoon.

A handheld credit card reader.

Image source: Getty Images.

The would-be buyer was not identified, nor was there any indication of a potential sales price. While the interest could lead to an eventual deal, investors should note that companies engage in talks from time to time, and even if there are serious negotiations ongoing, it does not mean a takeover will occur.

NCR traces its history back more than 130 years as a maker of cash registers but has changed with the times to create ever-more-sophisticated point-of-sale machines, ATMs, and self-checkout equipment. The company more recently has expanded into payment processing, attempting to evolve along with the retail environment.

Prior to the takeover speculation-related bounce, the company's shares were basically flat over the last year but up more than 20% in 2019.

Now what

NCR is a company in transition, and that transition is taking its time to play out. Back in February, the company forecasted revenue growth of only 1% to 2% and flattish earnings per share in 2019.

Given its substantial installed base and its broad portfolio of well-known brands, interest from a strategic or financial buyer makes sense. But until we know more about this potential buyout offer, investors would be best served watching from the sidelines.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends NCR. The Motley Fool has a disclosure policy.

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