NCR Corporation’s (NCR) fourth quarter EPS of 37 cents exceeded the Zacks Consensus Estimate of 26 cents.

Revenue

NCR reported revenue of $1.35 billion in the fourth quarter, a decrease of 5.0% from $1.42 billion in the year-ago quarter. Year-over-year revenue was impacted by global economic conditions, which had a substantial negative impact on the global financial services, retail and hospitality industries.

The company reports results according to the various geographic segments. Accordingly, the Americas reported revenues of $544.0 million, a decrease of 7.0% from the year-ago quarter. This decrease was primarily due to lower product sales to customers in the financial services and hospitality industries in the U.S., Carribean and Latin America.

In the Europe, Middle East, Africa (EMEA) region, revenues were $489.0 million, a decrease of 12.0% from the year-ago quarter. The decrease in revenue was primarily driven by the reduction in product sales to customers in financial services across the region.

The Asia-Pacific and Japan (APJ) region reported revenues of $312.0 million, an increase of 12.0% from the year-ago quarter. This increase may be attributed to lower sales in the financial services industry, as well as an eight percentage point positive impact of foreign currency translation.

Operating Results

The GAAP gross margin for the quarter was 18.3%, versus 23.0% in the year-ago quarter. Gross margin was negatively impacted by lower product sales and unfavorable mix, offset to a certain extent by the benefit from manufacturing realignment and cost reduction initiatives.

Income from operations was $39.0 million in the fourth quarter of 2009, which included $41.0 million in pension expense, $22.0 million of charge related to impairment of assets and $6.0 million of cost incurred in connection with headquarters relocation. This compares to $95.0 million of income from operations in the fourth quarter of 2008, which included $7.0 million of pension expense and $25.0 million of organizational realignment cost.

Excluding these items and pension expense, non-GAAP income from operations decreased to $108.0 million in the fourth quarter of 2009 compared to $127.0 million in the fourth quarter of 2008. This translates to non-GAAP operating margin of 8.0% for the quarter, a significant decline from 8.9% reported in the year-ago quarter.

Fourth quarter loss from continuing operations were $56.0 million or $0.35 per diluted share versus net income of $55.0 million or $0.34 per diluted share in the year-ago quarter. Loss from continuing operations included adjustment related to the FoxRiver environmental matter, impairment charge related to equity investment and headquarters relocation cost.

Excluding these items, non-GAAP earnings were $0.37 per diluted share versus $0.58 per diluted share in the year-ago quarter.

Balance Sheet

NCR generated $107.0 million of cash from operating activities during the third quarter of 2009 compared to $108.0 million in the year-ago period. Capital expenditures of $59.0 million in the fourth quarter of 2009 increased from $33.0 million in the year-ago period.

NCR generated $48.0 million of free cash flow (cash from operations less capital expenditures) in the fourth quarter of 2009, compared to free cash flow of $75.0 million in the third quarter of 2008. NCR ended the fourth quarter with $451.0 million in cash and cash equivalents, a $32.0 million increase from the $419.0 million in the previous quarter.

The Zacks Consensus Estimate for the fiscal year 2010 is $0.70, well over the most accurate estimate $0.51. Two analysts have made upward revisions to their fiscal 2010 estimate in the last 30 days, while two have made downward revisions.

Guidance

Given the limited near term visibility, NCR expects full-year 2010 revenue increase to be in the range of 2.0% to 5.0% on a constant currency basis compared with 2009. This apart, the company expects GAAP income from operation in the range of $95.0 million to $115.0 million and non-GAAP operating income in the range of $310.0 million to $330.0 million.

The company reiterated its earnings guidance. Consequently, diluted EPS (GAAP) is expected to remain in the range of $0.41 to $0.51 and non-GAAP EPS in the range of $1.35 to $1.45.

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