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NCR Stock Appreciates More Than 4% on Q1 Earnings Beat

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NCR Corporation NCR stock gained 4.3% during Tuesday’s extended trading session after the company reported better-than-expected results for first-quarter 2021. The company’s first-quarter non-GAAP earnings of 51 cents per share surpassed the Zacks Consensus Estimate of 47 cents. Moreover, the reported figure soared 65% year over year on higher revenues and cost reductions.

The company’s revenues of $1.54 billion topped the consensus mark marginally. The top-line figure also increased 3% year over year on a reported basis mainly driven by solid growth across the company’s retail and hospitality segments, partially offset by softness in the banking division.

Quarter Details

Banking revenues edged down 1% year over year to $756 million, primarily due to lower hardware sales, muted by higher software and services revenues to an extent.

NCR Corporation Price, Consensus and EPS Surprise

NCR Corporation Price, Consensus and EPS Surprise
NCR Corporation Price, Consensus and EPS Surprise

NCR Corporation price-consensus-eps-surprise-chart | NCR Corporation Quote

Retail revenues increased 13% to $532 million, chiefly on growth in point-of-sale and self-checkout revenues, as well as higher services revenues.

Hospitality revenues grew 6% to $179 million, primarily driven by an increase in point-of-sale revenues, as well as elevated services revenues.

The company’s Digital Banking Solution witnessed solid momentum. Digital banking registered users climbed 13% year on year.

Margins

Non-GAAP gross profit of $425 million was up 5.2% year over year. Non-GAAP gross margin expanded 60 basis points (bps) to 27.5%. Higher revenues and improved productivity are the key reasons behind these improvements in gross profit and margin.

Non-GAAP operating expenses declined 7.7% year on year to $277 million, chiefly on the company’s cost-cutting initiatives to address the pandemic’s impact on the business. The firm’s cost-cutting measures, included salary reductions, curtailing travels, and elimination of certain contractors.

Non-GAAP operating income increased to $148 million from the year-ago quarter’s $104 million. Non-GAAP operating margin expanded 270 bps to 9.6% from the year-earlier quarter’s 6.9%.

Other Financial Details

NCR ended the March-end quarter with cash and cash equivalents of $319 million compared with the $338 million reported during the December-end quarter.

Free cash inflow totaled $98 million compared with the prior quarter’s $20 million. Net cash provided by operating activities was $155 million during the first quarter.

Notably, NCR suspended its share-repurchase program and merger and acquisition activities, and cut senior employee salaries among other cost-containment measure during first-quarter 2020, in order to strengthen the company’s liquidity position.

Additionally, on Mar 24, the company withdrew the remaining available funds of $630 million from its five-year, $1.1-billion revolving credit facility. Also, on Apr 13, the company issued $400 million of senior unsecured notes.

Furthermore, the company deleveraged its balance sheet by $200 million in August 2020 through redeeming $1.3 billion of debt and issuing $1.1 billion of debt.

Zacks Rank and Key Picks

NCR currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Lam Research Corporation LRCX, Micron MU and NVIDIA NVDA. Lam Research and Micron sport a Zacks Rank #1 (Strong Buy), while NVIDIA carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Lam Research, Micron, and NVIDIA is currently pegged at 32.8%, 15.7% and 15.1%, respectively.

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You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

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