Despite beating the markets’ earnings expectations for the second quarter, shares of NCR Corporation (NYSE:NCR) are down by 9.35% after reporting a net loss in earnings. The technology company announced non-GAAP earnings per share of $0.66 against Wall Streets’ expectations of $0.60. NCR Corporation (NYSE:NCR) reported a year-over-year decline of 3% in its quarterly revenue to $1.60 billion, missing the market’s expectations of $1.62 billion. On a GAAP basis, the company reported a hefty loss of $2.03 per share, with its operating loss standing at $266 million for the quarter. According to the company, the primary reason for the losses was a non-cash charge of $427 million incurred after the settlement of its London U.K. Pension Plan.
Another reason contributing towards the declining share price of NCR Corp. is a report from the New York Post according to which, the company is planning to shut down its plans to sell itself after an acquisition deal from a private equity firm failed to go through. Thoma Bravo offered a $9-billion plus acquisition deal to the ATM company but the parties didn’t agree on the price, leading to the withdrawal of the equity firm. This is the second time that NCR Corporation (NYSE:NCR) has lost a potential bidder after losing a joint bid of $10 billion from the Blackstone Group LP and Carlyle Group LP earlier this year.
According to a report released by Spruce Point Management in April, the investment firm, which focuses on short-selling, rated NCR Corporation (NYSE:NCR) a “Strong Sell” with expected downside of 45% to 70%. Within this report, Spruce Point Management targeted the internal operation as well as management issues faced by the company, along with competition from mobile payment solutions such as Apple Pay and Google Wallet. The investment firm further disregarded a bullish outlook of a particular group of investors betting on the involvement of an activist investor in the company. Richard McGuire’s Marcato Capital Management initiated an activist position in the company in October 2014 and later became a member of the Board of Directors at NCR Corp. The short thesis looked to be in trouble shortly after that report was released when the first potential buyers for the firm stepped forward and shares made big gains. They have since given back all of those gains and more with both potential deals falling through, and sluggish financial results.
The shares of NCR Corporation (NYSE:NCR) are trading at $27.57, showing a year-to-date decline of 5.96%. Smart money held a bearish outlook of the company, with only 31 hedge fund managers investing $1.61 billion in the company at the end of the first quarter compared to aggregate investments of $1.82 billion a quarter earlier. The shares of NCR Corporation (NYSE:NCR) were up by 0.79% during the first quarter. Barry Rosenstein’s JANA Partners held the largest investment position in the company among the hedge funds in our database, with 14.81 million shares valued at $437.10 million.
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Keeping an eye out for insider activity allows investors to understand the insider sentiment on a stock. In the case of NCR Corporation (NYSE:NCR), the insiders have been disposing off their shares of the company throughout the year. Andrew Heyman, SVP and President, Financial Services at NCR Corporation, has sold 16,835 shares of the company year-to-date.
Considering all of these factors, we recommend investors to steer clear of the stock for the time being, as the short thesis proposed by Spruce Point is now looking much stronger following NCR’s inability to sell itself.
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