July 24, 2009

NCR Q2 profit beats Street, reaffirms 2009 outlook

Maker of automated teller machines NCR Corp (NCR.N) posted a quarterly profit that handily beat market estimates, aided by improved cost management, and stood by its 2009 forecast, sending its shares up almost 14 percent.

The company, which is also known for its self-service kiosks, expects to end the year with about 2,500 DVD rental kiosks. Earlier this year, it signed a deal with Blockbuster Inc (BBI.N) to provide 10,000 DVD rental kiosks by 2010.

On a conference call, the company said the roll-out of the DVD kiosks was going according to its plan.

While NCR's entry into the DVD kiosk market is considered "interesting," it is yet to be determined if this will be a good investment or not. [ID:nBNG501922]

"They are being measured and cautious in the roll-out of the DVD kiosks. It sounds like they are going to roll out very few units this year," Wedbush Morgan Securities analyst Gil Luria said, adding that NCR expects to accelerate the roll-outs next year.

NCR could face stiff competition from Coinstar Inc's (CSTR.O) Redbox business that currently dominates the market for DVD rental kiosks. Redbox has more than 15,000 locations, according to its website.

"NCR's challenge will be to get good real estate locations," Robert Baird & Co analyst Reik Read said.

"Redbox has a tremendous lead," he said, but added that the marketplace was always looking for a second supplier.

NCR's deal with Blockbuster could give it an edge when it comes to brand recognition in the marketplace.

"They may be able to capture 50 percent of the incremental share going forward, but again, Redbox starts off at a higher point," analyst Luria said.

The company's quarterly profit from continuing operations nearly halved to $23 million, or 14 cents a share.

However, excluding items, it earned 13 cents a share from continuing operations, while analysts on average were looking for 8 cents, according to Reuters Estimates.

Revenue fell 16 percent to $1.12 billion, trailing Wall Street estimates of $1.14 billion. Revenue was dragged by lower product sales in the Americas.

Selling, general and administrative expenses fell 15 percent to $156 million.

The company reiterated its 2009 earnings view of 60 cents to 75 cents a share.

It also continues to expect revenue to be 5 percent to 10 percent lower on a constant currency basis compared with 2008.

Shares of the Duluth, Georgia-based NCR were up $1.21 at $13.11 in afternoon trade Thursday on the New York Stock Exchange. The stock touched a high of $13.52 earlier.

Posted by staff at July 24, 2009 07:29 AM