NCR Corp. (NCR) is set to report the third-quarter 2014 results on Oct 23. Last quarter, the company posted a positive earnings surprise of 3.03%. Let us see how things are shaping up for this announcement.
Factors This Past Quarter
NCR reported mixed second-quarter 2014 results, wherein the bottom line beat the Zacks Consensus Estimate but the top line missed the same. The company witnessed margin expansion aided by a higher mix of software business.
NCR’s growing exposure into ATM and self-service kiosk spaces is encouraging, given tremendous growth prospects in the respective markets. Continuous product launches, growing popularity of its self-service offerings and synergies from acquisitions are the catalysts. Continuous deal wins also remain NCR’s strong point. Moreover, NCR has strengthened its position in the point of sale (POS) market through the integration of Radiant Systems.
However, softness in the ATM business in mature markets and competition from Diebold, Inc. (DBD) remain the concerns.
Also, owing to a difficult retail market condition, unfavorable foreign exchange rates and a sluggish macro economic environment, the company revised down its non-pension operating income (NPOI) to $204 million from an earlier forecast of $215 to $225 million. The company’s revenues for the quarter to increase 9% compared with an earlier guidance of 10% to 12% growth.
The company toned down the fiscal 2014 guidance as well. The company expects revenue growth in the range of 7% to 8% compared with 10% to 12% growth projected earlier. The company also revised down its NPOI from $900–$920 million to $810–$830 million and non-GAAP earnings from $3.00–$3.10 to $2.60–$2.70 per share.
Earnings Whispers?
Our proven model does not conclusively show that NCR is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 to surpass earnings estimates. However, that is not the case here due to the following factors:
Zacks ESP: NCR’s ESP is 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at 66 cents per share.
Zacks Rank: NCR currently has a Zacks Rank #5 (Strong Sell).
We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are a couple of other companies, which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Facebook, Inc. (FB), with an Earnings ESP of +6.25% and a Zacks Rank #2 (Buy)
Western Digital Corp (WDC), with an Earnings ESP of +0.98% and a Zacks Rank #3 (Hold).
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