Yahoo Finance NCR Shares Soar 12% on Q1 Earnings Beat, Strong Guidance
NCR Corporation NCR shares rose 12.3% during Thursday’s extended trading session after the company delivered better-than-expected first-quarter 2023 results. NCR’s first-quarter non-GAAP earnings increased 6% year over year to 56 cents per share and surpassed the Zacks Consensus Estimate of 43 cents.
Pricing and cost actions described in April 2022 were accretive to the company’s first-quarter bottom line. However, the strong U.S. dollar and a higher tax rate reduced non-GAAP earnings by 9 cents and 2 cents per share, respectively.
In the first quarter of 2023, NCR reported revenues of $1.89 billion, beating the consensus mark of $1.84 billion. The top line witnessed a year-over-year increase of 1%. Unfavorable currency exchange rates negatively impacted first-quarter revenues by approximately $45 million. NCR stated that the first-quarter top line grew 4% on a constant-currency basis.
NCR progressed significantly with its strategic growth initiatives, which are transforming it into a software platform and payments company. The company’s recurring revenues improved by 4% to $1.23 billion in the quarter under review.
NCR Corporation Price, Consensus and EPS Surprise
NCR Corporation price-consensus-eps-surprise-chart | NCR Corporation Quote
Segment Details
From the first quarter of 2022, NCR changed its reporting segments to correspond with changes to its operating model, management structure and organizational responsibilities. The new reportable revenue segments are Payments & Network, Digital Banking, Self-Service Banking, Retail and Hospitality.
Payments & Network revenues soared 11% to $323 million. NCR’s Digital Banking Solution revenues remained flat at $136 million. Hospitality revenues climbed 7% to $223 million.
In the first quarter, Self-Service Banking revenues increased 4% to $613 million. Retail revenues grew 4% to $552 million.
Operating Details
The non-GAAP gross profit of $496 million was up 9.5% year over year. Moreover, the non-GAAP gross margin rate expanded 190 basis points (bps) to 26.2%, mainly due to a reduction in direct costs (fuel, shipping and component costs), a higher-margin revenue mix and the benefits of indirect cost mitigation actions taken last year as well as in early 2023.
Non-GAAP operating expenses decreased 2% year over year to $290 million. As a percentage of revenues, non-GAAP operating expenses declined to 15.3% from 15.8% in the year-ago quarter due to improved productivity.
The non-GAAP operating income increased 30% year over year to $206 million, primarily driven by the higher gross profit and a reduction in operating expenses. As a result, the non-GAAP operating margin improved 240 bps to 10.9% in the first quarter.
Adjusted EBITDA increased 11% year over year to $302 million despite a negative impact of $18 million due to the unfavorable foreign currency exchange rate. The adjusted EBITDA margin expanded 150 bps to 16%.
Balance Sheet & Other Details
NCR exited the December-end quarter with cash and cash equivalents of $519 million compared with the $505 million reported during the September-end quarter.
Net cash provided by operating activities was $317 million in the first quarter. NCR generated free cash flow of $209 million in the reported quarter.
Guidance
While providing guidance for the first quarter and full-year 2023, NCR stated that beginning in 2023, it would exclude the impact of stock-based compensation expenses from the non-GAAP diluted EPS calculation. Up to 2022, the company included stock-based compensation expenses in the non-GAAP calculation. The change in methodology will inflate its EPS.
Coming to the guidance, NCR reaffirmed its outlook for the full-year 2023. NCR continues to project revenues between $7.8 billion and $8 billion for the full-year 2023. It still forecasts non-GAAP EPS in the band of $3.30-$3.50 under the new methodology.
The company continues to project adjusted EBITDA in the range of $1.45-$1.55 billion. NCR still expects to generate free cash flow in the band of $400-$500 million in 2023.
For the second quarter of 2023, NCR projects revenues between $1.9 billion and $2 billion. It forecasts a non-GAAP EPS in the band of 70-76 cents under the new methodology. The company projects adjusted EBITDA between $340 million and $360 million and expects to generate free cash flow of approximately $50 million in the second quarter.
Zacks Rank & Stocks to Consider
Currently, NCR carries a Zacks Rank #3 (Hold). Shares of NCR have declined 11.2% over the past year.
Some better-ranked stocks from the broader technology sector are Wix.com WIX, Zscaler ZS and Check Point Software CHKP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Wix.com’s first-quarter 2023 earnings has been revised upward to 23 cents per share from 16 cents per share 60 days ago. For 2023, earnings estimates have been revised northward by 7 cents to $1.49 per share in the past 60 days.
Wix.com's earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing the same on one occasion, the average surprise being 225%. Shares of WIX have declined 2% YTD.
The Zacks Consensus Estimate for Zscaler's third-quarter fiscal 2023 earnings has been revised 2 cents northward to 39 cents per share in the past 60 days. For fiscal 2023, earnings estimates have been revised northward by 8 cents to $1.52 per share in the past 60 days.
Zscaler’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 29.7%. Shares of ZS have declined 21.2% YTD.
The Zacks Consensus Estimate for Check Point Software's second-quarter 2023 earnings has remained unchanged at $1.89 per share for the past 60 days. For 2023, earnings estimates have moved upward by a penny to $7.98 per share in the past seven days.
Check Point Software's earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 3.7%. Shares of CHKP have declined 6.1% YTD.
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