This ATM manufacturer beat its quarterly earnings estimates by $0.04, posting EPS of $0.43.
NCR Corp (NCR)
from Sound Advice
NCR Corp (NCR) makes automatic tellers (ATMs), retail point-of-sale (POS) workstations, self-service kiosks, and other self-service checkout systems. 485 million people use NCR products every day, and there is room for substantial growth in the US and around the world.
A catalyst for growth comes from the fact that a majority of ATMs in the US still run on Windows XP which Microsoft just stopped supporting. That will translate into increased demand for NCR’s ATMs.
In 2013, NCR increased its debt load to make two significant purchases—Retalix, a transaction software provider, and Digital Insight, an online and mobile-banking solution provider. The cost of the debt used for these acquisitions dampened earnings growth which caused the stock to slide to its current attractive level.
These acquisitions pushed NCR much farther along its path from a hardware provider to more of a software and services provider where profit margins are substantially higher, and should be contributing to earnings substantially.
Fourth quarter revenue reported in February was evidence that the acquisitions are beginning to prove beneficial. In mid-April, NCR launched a significant software platform called Kalpana, which moves ATM software and operations to the cloud.
NCR is a value play. It is close to 10 times 2015 estimated earnings—a steep discount to the market. Its price to sales ratio is 0.8 compared to the industry average of 1.8. Its price to book value ratio is 2.7 compared to the industry average of 6.0.
Values like this often attract activists who make large investments and then try to unlock the value. There are some activists sniffing around NCR. JANA Partners recently purchased 7.1% of the outstanding shares. Marcato Capital Management, also an activist hedge fund, has also purchased a stake in NCR.
Gray Cardiff, Sound Advice, www.soundadvice-newsletter.com, 800-825-7007, May 1, 2015