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NCR Corporation (NCR) Q1 Earnings: Stock to Surprise?

NCR Corporation NCR is set to report first-quarter 2016 results on Apr 26. Last quarter, the company posted a positive earnings surprise of 5.75%. NCR has also outperformed the Zacks Consensus Estimate in all of the four preceding quarters, bringing the average surprise to 9.36%.

Let's see how things are shaping up for this announcement.

Factors at Play

We believe that NCR’s position in the self-service kiosk space is encouraging given the tremendous growth prospects. The company’s regular product launches enable cloud providers to gain access to its IT infrastructure and service support in a highly flexible and cost-effective way. Also, growing popularity of its self-service offerings, deal wins and synergies from acquisitions should boost results in the to-be-reported quarter.

During the first quarter, the company won various contracts including one for the deployment of its SelfServ ATMs at 1,100 branches of Deutsche Postbank AG. Moreover, BX Computers chose NCR Silver, a tablet-based POS platform to boost the former’s business efficiency. We believe that these deals will drive the company’s first-quarter revenues.

Moreover, the company has solidified its position in the POS market with the Radiant Systems integration, which should boost the upcoming quarter’s results.

Additionally, last month, NCR upped its earnings guidance for the first quarter as well as the full year, indicating the possibility of a strong quarter ahead.

However, softness in the ATM business in mature markets, competition from Diebold, Inc. and HP Inc. HPQ, and a high debt burden remain concerns.

Earnings Whispers

Our proven model does not conclusively show that NCR is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass estimates. However, that is not the case here, as you will see below:

Zacks ESP: NCR has an Earnings ESP of 0.00% since both the Most Accurate estimate and the Zacks Consensus Estimate stand at 33 cents.

Zacks Rank: NCR’s Zacks Rank #1 increases the predictive power of ESP. However, when combined with a 0.00% ESP, it makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a couple of stocks which you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Barracuda Networks, Inc. CUDA, with an Earnings ESP of +200.00% and a Zacks Rank #1.

Align Technology Inc. ALGN, with an Earnings ESP of +12.82% and a Zacks Rank #1.

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