NCR Stock Rallies 13% On Veritas Capital Takeover Report

NCR Corporation NCR stock jumped 12.7% on Tuesday after The Wall Street Journal ("WSJ") reported that the private equity firm — Veritas Capital — is in exclusive talks to buy the consumer transactions software and services company.

Formerly known as National Cash Register and founded in 1884, NCR offers payment processing, multi-vendor connected-device services, automated teller machines, point-of-sale ("POS") terminals and self-service technologies.

NCR's revenues in the first quarter of 2022 increased 21% year over year to $1.86 billion, while non-GAAP earnings plunged 35.3% to 33 cents per share. The top and bottom lines missed the respective Zacks Consensus Estimate of $1.92 billion and 64 cents per share. It lowered its full-year 2022 revenue forecast to $8 billion from the earlier guidance range of $8-$8.2 billion due to headwinds from the ongoing Russia-Ukraine conflict, inflation and the Omicron wave.

NCR Corporation Price and Consensus

NCR Corporation price-consensus-chart | NCR Corporation QuoteOf late, NCR is trying to diversify its business from hardware-focused products to payment solutions, software and services for banking, retail and hospitality industries. In this connection, the company has made several acquisitions in the past few years.

The most notable acquisition was the buyout of Cardtronics in June 2021, which further expanded NCR's payments platform and helped the firm connect with retail and bank customers. In January this year, it concluded the acquisition of Miami-based LibertyX, a leading cryptocurrency solution provider. The buyout expanded NCR's capabilities in offering a complete digital currency solution to its customers.

Additionally, In August 2021, NCR bought Foremost Business Systems, a Minneapolis-based POS and restaurant solutions provider. In February 2021, it acquired Terafina, a leading solution provider for customer account opening and onboarding across digital, branch and call center channels. This expanded the company's sales and marketing capabilities in its Digital First Banking platform.

Moreover, in January 2021, the company acquired Freshop, a grocery e-commerce solution provider, to enable the faster deployment of buy-online, pickup-in-store capabilities for retailers, including regional and small grocery chains.

The aforementioned acquisitions have not only diversified its businesses but also opened up new avenues of growth for NCR. The company's strategic moves to sustain long-term growth momentum might have put it in the takeover list of private equity firms like Veritas Capital.

However, citing unnamed sources, WSJ stated in its report that any deal could still be weeks away, but if materialized, it would be one of the biggest leveraged buyouts (LBOs). Moreover, the news agency cautioned that there is no guarantee any deal will go through as many LBOs failed to succeed recently due to the current market uncertainties and rising interest rates, which have increased the cost of financing.

Most recently, Kohl's Corporation KSS and Walgreens Boot Alliance WBA failed to conclude a takeover deal due to financing challenges, WSJ stated in its report.

Earlier this month, Kohl's ended the strategic review process without striking a potential $8-billion sale to Franchise Group Inc. Before that, Walgreens prohibited itself from selling its Boots drugstore chain to private equity firms Apollo Global and TDR as both bidders reportedly faced headwinds in raising financing for the deal.

Zacks Rank & Stock to Consider

Currently, NCR and Walgreens each carry a Zacks Rank #3 (Hold), while Kohl's has a Zacks Rank #5 (Strong Sell). Shares of NCR, WBA and KSS have plunged 18.4%, 26% and 40.1%, respectively, year to date ("YTD").

A better-ranked stock worth considering from the broader technology sector is Broadcom AVGO, which sports a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Broadcom's third-quarter fiscal 2022 earnings has been revised upward by 9.9% to $9.62 per share over the past 60 days. For fiscal 2022, the Zacks Consensus Estimate for Broadcom's earnings has moved north by 10 cents to $37.06 per share in the past 30 days.

Broadcom's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 2.2%. Shares of AVGO have plunged 23.5% YTD.
 
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