NCR Corp. (NCR) posted third quarter 2011 earnings per share of 53 cents, beating the Zacks Consensus Estimate of 48 cents.
Revenue
NCR Corp. reported revenues of $1.40 billion in the third quarter, up 16.2% from $1.20 billion in the year-ago quarter. Financial services generated revenue of $770.0 million in the reported quarter, an increase of 17.6% from the third quarter of 2010. This apart, the company witnessed across most geographies, which includes North America, Europe, Caribbean and Latin America (CLA) and South-Asia Pacific regions.
Retail solutions segment reported revenue of $461.0 million, up 7.2% year over year. This was largely driven by growth in the North America, Japan/Korea, Brazil/India/China/Middle East Africa (BICMEA) and South Asia Pacific regions.
The Hospitality & Specialty Retail segment reported revenue of $36.0 million. The revenue in this segment was driven by product volumes and services revenue in the North America.
Entertainment revenue for the quarter was $42.0 million, increasing 44.8% year over year basis from $29.0 million.
Emerging Industries revenue was $94.0 million, which grew 1.07% year over year mainly attributable to growth in services business from the company’s Telecom & Technology customers in the North America and Europe.
Operating Results
Gross margin in the quarter was 20.9% versus 20.4% in the year-ago quarter. The year-over-year increase was fueled by higher product sales, favorable mix and the successful implementation of cost reduction initiatives, driven by the company’s business process initiatives.
NCR reported third quarter net income from continuing operations (attributable to NCR) of $16.0 million or 10 cents per diluted share compared with $83.0 million or 48 cents per diluted share in the year-ago quarter. Excluding special items like impairment and pension expense and headquarter relocation expense, non-GAAP income from continuing operations was 53 cents per diluted share compared with 46 cents per diluted share in the prior-year quarter.
Balance Sheet & Cash Flow
Net cash used in operating activities was $7.0 million during the third quarter of 2011 compared with $48.0 million in the year-ago period. Cash used in operating activities in the reported quarter was positively impacted by the annual improvement in working capital. NCR ended the third quarter of 2011 with $341.0 million in cash and cash equivalents compared with $457.0 million in the prior quarter. In the quarter, NCR had a debt balance of $1.06 billion.
Guidance
The company expects fiscal 2011 revenues to increase in the range of 8.0% to 10.0%. GAAP diluted earnings per share is expected in the range of 65 to 69 cents and non-GAAP diluted earnings per share, excluding pension expense and special items, in the range of $1.79 to $1.83 per diluted share.
Conclusion
NCR reported decent third quarter results, with revenues improving across all business segments. However, revenue growth was witnessed across all major geographies. We are encouraged by the fiscal year guidance, and believe that the company is well positioned to deliver solid momentum across all its businesses.
We are positive about the company’s market leadership, successful acquisitions, product introductions and continued customer wins. However, the restructuring initiatives have begun impacting the results. This apart, the company is cash rich.
The company has short term Zacks #1 Rank, implying a short-term Strong Buy recommendation.
