MICROS Reiterated at Neutral - Analyst Blog
October 12 2012 - 11:45AM
Zacks
We reiterate our Neutral
recommendation on MICROS Systems, Inc. (MCRS) as
we believe that the risk-reward profile of the company is currently
balanced. We are optimistic on the company’s strategic contract
wins and share repurchase initiatives, which are expected to
neutralize the effects of the clouded macro-economic conditions and
ominous competition prevailing in the industry.
The company’s best-in-class
services, well-diversified business portfolio, long-term and steady
working histories with its clients are the key growth drivers which
helped it establish itself in a formidable position within the
hotel information systems market. Additionally, the company’s newly
introduced product ranges including point-of-sale solution (POS),
OPERA Enterprise Solution (OES), Restaurant Enterprise Series (RES)
and many other advanced platforms are constantly supporting its
businesses and setting the stage for further growth.
Various strategic contract wins
hold future pledge for MICROS. The company confirmed winning a
bunch of contracts from Carino’s Italian, Moran & Bewley’s
Hotel Group, Delaware North Companies, Delta Hotels and Resorts,
Aston Hotels & Resorts, LLC, Rex Restaurant Associates,
Delaware North Companies and many more during fiscal 2012. We
believe that these agreements are likely to heighten the company’s
revenue stream in future.
Further, one aspect, which has
forever been an integral part of MICROS’ total approach, is its
desire to return optimum value to its shareholders through buy back
activities. During the first quarter of fiscal 2012, the Board of
Directors had approved a stock buy-back program authorizing the
company to repurchase up to 2.2 million shares over the next three
years. Under this share authorization program, the company
repurchased nearly 1.3 million shares during fiscal 2012 out of
which 110,000 shares were bought back in the fourth quarter of
fiscal 2012.
However, the scenario is not really
as bright as it appears as certain issues still continue to be
troublesome for the company. Business for MICROS was adversely
affected by the weak economic condition. Weakened consumer spending
and difficulties in obtaining credit negatively prevented customers
from acquiring or opening new hospitality and retail venues.
Although the economy is showing signs of revival, customer spending
is still quite low.
The company’s significant portions
of revenues came from its international operations. Hence, it is
highly exposed to foreign currency fluctuation. In addition, the
risk of strong competition from various big and small industry
players such as NCR Corp. (NCR), Panasonic
Corporation (PC) and PAR Technology
Corporation (PAR) would also affect MICROS’ profitability
moving ahead.
Hence, until the situation
ameliorates and a brighter picture appears on the scene, we
consider it wise to maintain a sideline stance on MICROS. In the
short run, we have a Zacks #3 Rank on the stock, which translates
into a short-term ‘Hold’ rating.
MICROS SYS (MCRS): Free Stock Analysis Report
NCR CORP-NEW (NCR): Free Stock Analysis Report
(PAR): ETF Research Reports
PANASONIC CORP (PC): Free Stock Analysis Report
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