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NCR Corp. (NCR) Continues to Grow: Time to Hold the Stock?

Zacks Equity Research

NCR Corporation NCR is a stock that has lived up to its promise and delivered. Investors should therefore hold on to it as they ring in 2017.

Over the last six months, the stock has surged roughly 46.2% and crushed the Zacks categorized Computer-Integrated Systems industry, which increased just 13.4%.

What’s Driving its Growth?

NCR reported encouraging third-quarter 2016 results (on Oct 25, 2016) wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Also, both revenues and earnings increased on a year-over-year basis, primarily due to higher Software and Service revenues. The company raised its full-year 2016 revenue guidance and provided an encouraging fourth quarter revenue outlook.

NCR raised its full-year 2016 guidance. The company now expects revenues to be in a range of $6.47 billion–$6.50 billion (previously $6.325 billion–$6.400 billion). The Zacks Consensus Estimate is pegged at $6.485 billion. The company now expects non-GAAP earnings per share for the full year to range between $2.97 and $3.02 (previously $2.90 and $3.00 per share). The Zacks Consensus Estimate is pegged at $2.99.

Coming to the fourth-quarter outlook, NCR expects revenues in a range of $1.729 billion to $1.759 billion. The Zacks Consensus Estimate stands at $1.743 billion. The company expects non-GAAP earnings per share for the third quarter to range between $1.01 and $1.06. The Zacks Consensus Estimate is pegged at $1.03 per share.

The company has been the global leader in self-service ATMs for several years in terms of market share. The company remains the largest supplier of ATM machines in Asia-Pacific and North America while maintaining its leadership in the Asian and European markets. By 2020, the global research company RBR Research expects India to install base similar to the size of the U.S., trailing only China. Currently, India is the world’s fourth-largest ATM market with China, the U.S. and Japan holding the first three spots. This creates huge opportunities for companies like NCR.

Going forward, continuous product launches, growing popularity of its self-service offerings and synergies from acquisitions are the catalysts. Continuous deal wins also drive growth. Moreover, NCR strengthened its position in the POS market through the integration of Radiant Systems.

The company, with a VGM Score of ‘A,’ posted an average positive earnings surprise of 9.77% in the trailing four quarters and has market cap of over $5 billion.

Risks Remain

Softness in the ATM business in mature markets, competition from Diebold Inc. DBD and HP Inc. HPQ, and a high debt burden remain concerns.

We suggest investors to hold this stock as it is most likely to give high returns in 2017.

Currently, NCRhas a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Better-ranked stocks in the technology sector are Marvell Technology Group Ltd. MRVL and NVIDIA Corporation, both sporting a Zacks Rank #1.

Marvell and NVIDIA have long-term expected earnings per share growth rate of 12.33% and 10.3%, respectively.

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