NCR Corporation (NCR) Lower Q3 Outlook

NCR Corporation (NYSE: NCR) sees Q3 revenue of $1.647 billion (consensus $1.66 billion) and non-pension operating income (NPOI) is expected to be approximately $204 million, lower than our previous guidance of $215 million to $225 million. Third quarter 2014 non-GAAP diluted earnings per share is expected to be approximately $0.67 (consensus $0.71), which is below our previous expectations due to lower operating results and unfavorable foreign currency impacts, partially offset by a lower effective income tax rate.

“In addition to our third quarter preliminary results, we now expect our 2014 results to be below our previous guidance, due largely to a challenging retail market as well as difficult global macroeconomic conditions, including foreign currency headwinds,” said Chairman and CEO Bill Nuti. Mr. Nuti continued, “Market conditions within the retail industry worsened in the third quarter, as evidenced by weak same store sales comparisons and financial results. This resulted in our retail customers spending more cautiously than anticipated and further delaying solution rollouts. Contributing further are ongoing data security concerns, which were heightened in the third quarter. This is causing retailers to shift IT priorities, resources, and capital spending. Additionally, ongoing retail consolidation continues to be a factor impacting our performance.”

Mr. Nuti added, “While we are disappointed by these results, our Financial Services business remains a bright spot, third quarter free cash flow improvement was strong, and our previously announced restructuring program is on track to deliver annual run-rate savings of approximately $90 million by 2016. While we continue to be faced with challenging and uncertain market dynamics, we remain confident in the actions we are taking to address these challenges, including strengthening our Retail Solutions team and talent, as well as utilizing our restructuring program to allocate more resources to our highest growth, highest margin opportunities to drive long-term profitable growth.”

For the full-year 2014, revised expectations are as follows: year-over-year revenue growth of 7% to 8%, or revenue of $6,575 million to $6,625 million, which includes 1% of unfavorable foreign currency fluctuations; NPOI of $810 million to $830 million; and non-GAAP diluted earnings per share of $2.60 to $2.70. This compares to previous guidance of year-over-year revenue growth of 10% to 12%, or $6,750 million to $6,850 million; NPOI of $900 million to $920 million; and non-GAAP diluted earnings per share of $3.00 to $3.10. Additionally, software-related revenue is expected to be $1,700 million to $1,725 million, compared to previous guidance of $1,775 million to $1,825 million. Free cash flow, which includes the $93 million Fox River environmental recovery, is expected to be approximately $225 million to $275 million versus our previous guidance of $250 million to $300 million

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