More Industries to Adopt NCR's Self-Service Technologies?
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NCR (NYSE: NCR), well known for its position in the financial and banking markets and retail self-service technologies, be it ATM machines or point-of-sale systems, is now making its mark in the hospitality/hotel sector, as well as other businesses. The company has seen bottom-line gains and a jump in the stock price to show for it. I believe the potential customer base for kiosks is growing, a trend that should support an ongoing surge in NCR's profits.
The customer-acquisition strategy
NCR's top initiative in targeting profitable market-share gains is "penetrating market adjacencies in single- and multi-channel market segments." This means expanding beyond the retail and hospitality end markets to bring self-service technologies to telecom, technology, travel, and gaming companies. Related investments consist of new integrated-service offerings, acquisitions, and strategic partnerships.
In February, it took a step toward broadening its capabilities through the acquisition of Retalix, a producer of software and services that enable the deployment and build-out of self-checkout systems. The purchase price was approximately $700 million. In-store, mobile, and online sales channels are all addressed by Retalix's products that retailers may utilize to boost margins and customer loyalty.
Retalix is already proving lucrative, helping NCR to attain the likes of Petro-Canada gas stations and Massdiscounters of South Africa as clients. Disregarding Retalix, NCR is making strides in emerging markets in travel, most recently with China Southern Airlines, the Latin American Avianca Taca airline, China's Ordos Ejin Horo airport, and through the expansion of mobile boarding-pass technologies. Plus, it is launching innovations targeted at the restaurant and cinema markets.
Who's on board?
Looking forward, will these restaurant and movie-theater services catch on with major industry players? The recently released NCR Aloha Mobile equips restaurant patrons with mobile ordering and payment activities while tableside. Some new restaurant customers gained have been Shake Shack and Jamba Juice. Independent research firm Gartner estimates that market will grow to 448 million users and $617 billion in transactions by 2016. As for cinema, NCR has introduced upgraded ticket and concession vending systems, as well as a mobile (smartphone) application allowing companies to interact with customers. The technologies are likely to gain acceptance in the marketplace.
Such examples demonstrate NCR's growth potential in emerging end markets.
Electronics makers expanding their reach
NCR's counterparts in the electronics industry include contract manufacturers, many of whom are aiming to capture share of industries that are increasingly outsourcing their production and supply-chain processes. One example of this is Kimball International (NASDAQ: KBALB), an electronics-manufacturing-services firm primarily working with the medical, automotive, industrial, and public-safety industries. Kimball's revenue and earnings are on a growth trajectory that ought to persist behind rising demand from the automotive industry in the U.S. and China, as well as burgeoning sales to the industrial sector, with the exception of the HVAC market. Kimball shares offer price-recovery potential for buy-and-hold investors.
A second EMS company that is capitalizing on several years of initiating and ramping up new production programs is Benchmark Electronics (NYSE: BHE). Benchmark's bottom line is apt to decline this year, largely due to the deterioration of its traditional computing business. Still, it is experiencing higher revenues from industrial control and medical clients, while telecom and test-equipment makers are also part of its customer contingency.
Conclusion: NCR is a buy
NCR is in a good spot at this juncture, with capital expenditures by banks and financial institutions on the rise, driving upturns in its core automated-teller-machine business. Furthermore, its Retail and Hospitality units are performing better, as investments in those units come to fruition. Expansion into lesser-served markets, the overall focus of this posting, might well help NCR achieve its goals.
In all, share earnings are likely to climb around 20% in 2013. The stock is valued at an appealing P/E, despite a recent surge. With a favorable environment, it could be an above-average price gainer in the near term and remains a holding for long-term investors, also.
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Damon Churchwell 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!