Can a Reinvented Century-old Cash Register Still Deliver?

Arturo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

You’d stand to be a potential darling to investors if what you’ve been doing for over a hundred years is help count money, exactly the space and time where NCR Corp. (NYSE: NCR) has been thriving.

Its roots traces back to the 1879 invention of the first mechanical cash register for which a Dayton, OH-based company, National Manufacturing Co., was established. It was renamed five years later to National Cash Register Co. from which the NCR corporate identity eventually emerged.

The company, to its credit, has continuously reinvented itself over the years. It now provides Automated Teller Machines (ATMs), self-service kiosks, and point of sale devices as part of its portfolio of self-service and assisted-service solutions for customers in various industries, such as retail, financial services, travel and hospitality, telecom and technology. It likewise provides software applications enabling consumer interaction with businesses from a computer or mobile device.

Solid industry leadership affirmed

NCR is the largest worldwide supplier  of multi-vendor ATM applications and middleware, based on research by RBR (Retail Banking Research), a strategic research and consulting firm. The RBR report likewise noted that the company’s APTRA software suite is used by more ATMs in North America, Africa and the Middle East, than other providers. The research also indicated substantial growth in users of the multi-vendor software with 740,000 ATMs worldwide running the application, a 60% increase since 2009.

ACI Worldwide (NASDAQ: ACIW) is another company which can draw strength from this rising trend.

This Naples, FL-based company flaunts an electronic payments software product line and the suite of services it engender. Its products and services are principally used by financial institutions and retailers as well as electronic payment processors, both in the U.S. and in the international markets.

In March this year, ACI acquired Online Resources Corp., a major provider of solutions for online banking and full service bill payment.

A bullish beat from financial institutions’ cost cutting

There’s mounting pressure in the banking and finance industry to cut costs, as demonstrated by an increasing number of bank branch closures in the U.S. Factor in the customers’ increasing acceptance of online and mobile banking, and a bullish beat ticks for more than NCR and ACI.

These developments also provide tailwinds for Diebold (NYSE: DBD) which supplies  ATM security products and services, deposit automation, and payment processing. In September last year, Diebold expanded its security expertise and acquired GAS Tecnologia, a Brasilia, Brazil-based company providing services for secure Internet banking, online payment and mobile banking.

How the momentum builds

<table> <thead> <tr><th> <p>1<sup>st</sup> Quarter Income Statement</p> </th><th> <p>ACI</p> </th><th> <p>Diebold</p> </th><th> <p>NCR</p> </th></tr> </thead> <tbody> <tr> <td> <p>Total revenue</p> </td> <td> <p>$163M</p> </td> <td> <p>$633.5M</p> </td> <td> <p>$1.4B</p> </td> </tr> <tr> <td> <p>Total revenue % change</p> </td> <td> <p>15%</p> </td> <td> <p>(9.3%)</p> </td> <td> <p>13%</p> </td> </tr> <tr> <td> <p>Net (loss) income</p> </td> <td> <p>($2M)</p> </td> <td> <p>($13.4M)</p> </td> <td> <p>$61.0M</p> </td> </tr> <tr> <td> <p>GAAP diluted (loss) EPS</p> </td> <td> <p>($0.05)</p> </td> <td> <p>($0.21)</p> </td> <td> <p>$0.37</p> </td> </tr> </tbody> </table>

A quick look above at the 2013 first quarter results for ACI, Diebold, and NCR indicates that NCR has the most momentum to ride for the rest of the year. NCR had a non-GAAP diluted EPS of $0.54 for the 2013 first quarter, up 15% year over year. For the full year, the company affirmed its 9–11% revenue growth guidance and raised its GAAP income from operations guidance to $546 million–$566 million and diluted Earnings Per Share (EPS) to $2.08-$2.18 from the previous $548 million–$563 million and $2.06–$2.16 forecast range.

Diebold, on the other hand, reaffirmed its prior 2013 guidance of either flat full-year non-GAAP EPS or moderately lower on relatively flat revenue. It also revealed details on a multi-year plan aimed at reducing its cost structure by $100 million–$150 million by 2015.

With its Online Resources acquisition, ACI raised its FY 2013 guidance for non-GAAP revenue to $895 million–$915 million from $170 million–$180 million. Its non-GAAP operating income guidance was reset to $170 million–$180 million and adjusted EBITDA to $266 million–$276 million.

Foolish take beyond counting bills and loose change

Given this scenario, the smart money would veer toward a bet on NCR considering its more solid footing than ACI and Diebold, both of which still need to work out synergies from their recent acquisitions.

Additionally, NCR has added more new customers in recent months not only in the retail industry where its cash registers first became iconic fixtures of business. This June, the Nationwide Building Society, a leading retail banking organization in the U.K. deployed NCR’s skimming protection solution, yet another evidence of NCR’s dramatic (and fruitful) transformation beyond counting bills and loose change.

Arturo Cuevas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus