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NCR Inks Deal with BX, Guides Up, Prices Convertible Notes

Zacks Equity Research

NCR Corporation NCR recently entered into an exclusive agreement with Blackstone Group L.P. BX, under which the latter is free to sell its stock and realize gains on its early bets. The deal also extends the lockup period on the remaining investments.

The transaction is expected to increase NCR’s shareholders’ value and at the same time enhance its overall capital structure.

Per NCR Chairman and CEO, Bill Nuti, “This transaction is more accretive to our stockholders than further open market purchases, eliminates the ongoing dividend costs on the preferred shares, is accretive to EPS, and reduces our financial leverage.”

Share Repurchase Program

Concurrent with this deal, the board of directors of NCR authorized an additional share buyback program to return more value to the company’s shareholders. The company is expected to buy back 4.4 million shares of common stock for $204 million in 2017. The latest authorization will allow the company to increase its planned 2017 share repurchases to approximately $350 million, up from the from previous $300 million.

Further, the company announced a new authorization on Mar 12, 2017, for $300 million.Share repurchase programs raise optimism among investors and boost their confidence in a stock.

Public Offering

NCR also announced the pricing of secondary public offering of its Series A convertible preferred shares. The company will offer 342,000 shares at a price of $1,602.99 per share. Subject to customary closing conditions, NCR 's offering will close on Mar 17.

Guidance Update

Also, the company recently increased its non-GAAP earnings per share (EPS) guidance for 2017 to the range of $3.27–$3.37 from $3.25–$3.35 projected previously. The Zacks Consensus Estimate is pegged at $3.31.

Bottom Line

Notably, the stock has outperformed the Zacks categorized Computer-Integrated Systems industry over the last one year. During the said period, NCR returned 62.62% compared with the industry’s gain of 29.08%.

NCR’s growing strength in the ATM and self-service kiosk spaces is encouraging, given the tremendous growth prospects in the respective markets. The company’s continued product launches will enable cloud providers to gain access to NCR’s IT infrastructure and service support in a highly-flexible and cost-effective way. Also, growing popularity of its self-service offerings, new deal wins and synergies from acquisitions are catalysts.

However, softness in the ATM business in mature markets and competition from Diebold Incorporated DBD and HP Inc. HPQ remain concerns.

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

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