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NCR preps investors for disappointing Q3 results, lowers full-year 2014 guidance

Financial services remain a bright spot, but worsening market conditions in retail have prompted the company to dial back its earnings forecast.

October 21, 2014

NCR Corp. has announced preliminary third quarter 2014 results and provided an update to its outlook for the full year 2014. For the third quarter 2014, revenue is expected to be approximately $1,647 million, constituting year-over-year revenue growth of 9 percent, (10 percent on a constant currency basis). Nonpension operating income is expected to be approximately $204 million, lower than the company's previous guidance of $215 million to $225 million.

Third quarter 2014 non-GAAP diluted earnings per share is expected to be approximately 67 cents — a reduction of previous expectations linked to lower operating results and unfavorable foreign currency impacts, partially offset by a lower effective income tax rate.

NCR Corp. Chairman and CEO Bill Nuti explained the forces at work behind the company's disappointing numbers:

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.

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.

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 percent to 8 percent, or revenue of $6,575 million to $6,625 million, which includes 1 percent 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 percent to 12 percent, 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.

NCR will provide more detailed information regarding its third quarter results and full-year outlook when it reports earnings on Oct. 28.