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NCR Corp Benefits From Acquisitions Amid Rising Competition

Published 12/25/2019, 10:26 PM
Updated 07/09/2023, 06:31 AM

NCR Corporation’s (NYSE:NCR) growth trajectory has been driven by strategic acquisitions. In the past two decades, the company bought more than 20 companies that not only expanded its portfolio of solutions but also total addressable market.

For instance, the acquisition of D3 Technology, completed in July 2019, has helped NCR to strengthen its footprint in the digital banking space, both in large domestic banks and international banks. Notably, the clinical services provider NYMBUS licensed the D3 Digital Banking platform shortly after the acquisition was completed.

Further, per the latest 10Q filing, NCR bought several resellers within its Hospitality segment. The acquisitions were completed in the first and second quarters of 2019. These along with the acquisition of payments firm, JetPay, completed in December 2018, has been aiding Hospitality revenues (12.1% of third-quarter revenues), which increased 12% on a reported basis and 13% in constant currency (cc) in third-quarter 2019.

Moreover, NCR’s retail business (30.2% of third-quarter revenues) benefited from JetPay contribution. Retail revenues rose 12% on a reported basis and 13% in cc.

This has also helped NCR return 51.5% year to date compared with the industry’s rally of 24%.

Year-to-Date Return

NCR Buys Edge Computing Provider Zynstra

The company’s latest acquisition of U.K.-based Zynstra, a provider of edge virtualization technology, is expected to solidify its footprint in the retail space.

Notably, NCR and Zynstra have been long-time partners and their subscription-based virtualization solution — NCR Software Defined Store — was launched in January 2019.

According to NCR President and CEO Michael D. Hayford, “The addition of Zynstra’s virtualization technology to our software stack gives NCR even more solutions to help our customers run their store or restaurant end-to-end.”

Notably, edge computing is an extension of compute processing, which literally means moving system processing and intelligence out from the data center and closer to endpoints of the user. The user may be a human being, IoT devices, sensors and medical devices.

This scenario has led to the development of new types of virtualization solutions that focus on data computing at the edge. Per IDC projections, by 2023, more than 50% of new infrastructure deployed will be at increasingly critical edge locations rather than corporate datacenters, up from less than 10% currently.

Stiff Competition to Hurt Growth

The latest acquisition places NCR against the likes of VMware (NYSE:VMW) , Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) . These companies have already launched innovative solutions to gain share in the edge computing market.

Further, growing competition from companies like Diebold and Fidelity in its key operating markets is a major concern. The persistent softness in the Hardware segment also makes us cautious about the company's near-term performance.

Notably, the Zacks Consensus Estimate for 2019 earnings has declined 0.7% to $2.80 per share in the past 60 days. Moreover, the consensus mark for 2020 earnings has declined 2.2% to $3.06 per share over the same time frame.

NCR currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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NCR Corporation (NCR): Free Stock Analysis Report

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

VMware, Inc. (VMW): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

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