Diebold: Get Some Cash from this ATM Maker

02/22/2018 5:00 am EST

Focus: FINANCIALS

Taesik Yoon

Editor, Forbes Investor and Forbes Special Situation Survey

Diebold Nixdorf (DBD) is a leading global technology company, providing businesses in the financial and retail industries with solutions that enable them to conveniently, securely and efficiently transact with their customers, observes Taesik Yoon, growth stock expert and editor of Forbes Investor.

Diebold is the biggest global servicer of automated teller machines (ATMs), point of sale (POS) terminals, self-checkout (SCO) systems and other distributed IT assets that allow banking and retail customers to meet the growing demand for transaction availability. 

The stock is down 22% so far in February. This slide comes even as the company reported Q4 net sales and adjusted earnings of $1.25 billion and 40 cents per share this morning that exceeded analyst expectations by $29.3 million and 5 cents, respectively. 

Of course, it didn’t help that DBD is projecting revenue and adjusted earnings of just $4.5-4.7 billion and $1.00-1.30 per share in the current year, which fell short of their respective consensus estimates of $4.65 billion and $1.46 per share.

It is likely that investors are growing increasingly frustrated by the delays in completing certain large, complex projects within its banking business. Yet while this profit outlook is obviously disappointing, the midpoint still implies year-over-year growth. 

What’s more, as we expect this growth to be a product of easing top-line pressure in its banking hardware business, the continuation of strong demand for its services and software solutions, and additional benefits from the integration of Wincor Nixdorf such as further streamlining costs, increasing productivity and strengthening its competitiveness—all of which should be more pronounced in the second half—we think its operations have the potential to exit the current year with good momentum. 

When combined with the healthy level of cash that the company continues to generate — which helped reduce its net debt by $224.5 million or 15.4% in Q4 — and the drubbing that DBD stock had already taken over the past year, we view this latest sell-off as far too severe.

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