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NCR Plans to Spin Off Into Two Companies by Next Year End

·5 min read

NCR Corporation NCR recently announced its plan to spin off into two new publicly traded standalone companies following a strategic review. One of them will focus on the digital commerce business spearheading the retail, hospitality, and digital banking industries. The other will be providing solutions related to global ATM-as-a-Service and ATM network businesses.

On Feb 8, NCR declared the commencement of a strategic reviewing process evaluating alternatives to maximize shareholder value. Taking assistance from Goldman Sachs, Bank of America Securities and Evercore, the company assessed several alternative possibilities, which also included the possibility of the divestment of the whole company’s business. Considering the ongoing macroeconomic headwinds and a thorough evaluation, NCR’s board of directors decided that a spin-off would be in the shareholders' best interest among all the other options.

Upon separation, the digital commerce company will be a growth business positioned to leverage NCR’s software-led model to continue transforming, connecting and running global retail, hospitality and digital banking. Meanwhile, the ATM-related business entity will be a cash-generative business positioned to focus on delivering ATM as a Service to a large, installed customer base across banks and retailers.

NCR Corporation Price and Consensus

NCR Corporation Price and Consensus
NCR Corporation Price and Consensus

NCR Corporation price-consensus-chart | NCR Corporation Quote

In the second quarter of 2022, NCR’s Self-Service Banking segment, which includes a comprehensive line of ATM hardware and software solutions, related installation, maintenance, and managed and professional services, reported revenues of $679 million. The figure rose 5% year over year on strong momentum as a result of the accelerated transformation toward adopting solutions like the ATM-as-a-service solution.

The ATM-related company will further boost this momentum to meet global demand for ATM access and leverage new ATM transaction types, including digital currency solutions, which will expand growth opportunities in the market. It will get transformed into a highly recurring revenue model to drive stable cash flow and capital returns.

The digital commerce company, on the other hand, will also reinvest to accelerate growth and recurring revenues. It will maximize common solutions to drive innovation and strengthen operational efficiency.

The separation intends to attract distinct shareholder bases, better aligned with each company’s value proposition and financial profile. Each of the companies will follow different business goals, capital structures and allocation strategies. This will enable NCR to deliver long-term growth with increased flexibility in separate sets of operations and sustainably create value for stockholders, offering them greater transparency.

The transaction is expected to be tax-neutral for NCR and is likely to be completed by the end of 2023. Currently, the company is assessing key aspects of the spin-off, which include potential cost-saving opportunities, management teams, boards, capital structures and capital return policies.

Despite supply chain disruptions and other macroeconomic headwinds, NCR managed to deliver outstanding second-quarter 2022 results with strong revenue growth and increased profitability. The enterprise technology provider reported revenues of $2 billion, witnessing a year-over-year surge of 19%. The upside was driven by strong execution, the contribution from the Cardtronics buyout and solid growth across the company’s Payments & Networks, Self-Service Banking and Hospitality segments.

Zacks Rank & Stocks to Consider

NCR currently carries a Zacks Rank #3 (Hold). Shares of NCR have plunged 39.6% in the past year.

Some better-ranked stocks from the broader Computer and Technology sector are Clearfield CLFD, Silicon Laboratories SLAB and EPAM Systems EPAM, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Clearfield's fourth-quarter fiscal 2022 earnings has been revised 10 cents north to 80 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past 60 days.

Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have improved 112.3% in the past year.

The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 36% to $1.13 per share over the past 60 days. For 2022, earnings estimates have moved 20.5% up to $4.41 per share in the past 60 days.

Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have declined 8.3% in the past year.

The Zacks Consensus Estimate for EPAM Systems' third-quarter 2022 earnings has been revised 5 cents northward to $2.45 per share over the past 30 days. For 2022, earnings estimates have moved 13 cents north to $9.79 per share in the past 30 days.

EPAM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 23%. Shares of the company have declined 33.6% in the past year.


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