Diebold Stock Shows Long Term Strength In Latest Earnings

  • The latest set of Diebold earnings numbers came out on 30 July pre-market.
  • Global weakness, especially in Europe and Brazil hurt Diebold.
  • The strong dollar will continue to hurt their global business.
  • Diebold has a strong long-term outlook, but the near term could be weak.
Diebold Stock Dips Post Latest Earnings

Diebold (NYSE:DBD) reported 2nd quarter results this morning, beating forecasts for revenue and earnings. The maker of bank ATM machines, security systems, and related equipment had revenue of $733.4 million in the 2nd quarter, surpassing analyst expectations of $711 million. Earnings per share, adjusted for restructuring and non-recurring expenses, were 44 cents per share, compared to analyst forecasts of 40 cents per share.

Diebold's revenue was flat compared to the same period last year, which also came in at $733 million. Year-over-year EPS fell for the period. GAAP EPS dropped from 64 cents last quarter to 34 cents per share, and Non-GAAP EPS slid from 47 cents to 44 cents per share. The market's reaction to the announcement was neutral; Diebold stock price hovered near yesterday's price of $33.56 fifteen minutes after the open. Investors seeing the company beat expectations were offset by investors noticing slowing results from last year. GAAP gross margins were up 10 basis points.

The company has reaffirmed guidance for 2015. Earnings per share is expected to be come in at $1.70 - $1.90, down 5%-6% compared to 2014.

Recent news worth noting include cutting expenses through management restructuring. The company announced today that it has eliminated the position of chief operating officer. As a result, George S. Mayes, Jr., executive vice president of global manufacturing, has left the company. Diedbold is moving to a more distributed management model, allowing more decisions to occur at lower levels to better meet customer needs. Other positions have previously been eliminated and apparently more are to come.

Like many U.S. companies with a global market, Diebold is being hurt by the strong dollar. This can be seen in the fact that revenue was flat, but would have increased by 7.8% based on constant currency figures. Weakening in Brazil's currency and the Euro were the main causes of the currency impact on revenue.

This is a textbook example of a company that is steadily growing, but the financial results don't reflect that due to currency fluctuations. The company reported the following in constant currency: Financial self-service revenue growth of 13%, security revenue up 8%, and total revenue up 7.8% as noted above.

The company continues to look for acquisitions that will be smart additions to their business. Last month, German ATM maker Wincor Nixdorf's stock jumped when it was rumored to be in talks about being acquired by Diebold. Their management, however, said they were not interested in being acquired.

The company is attractive with its steady international growth. However, it is not likely to overcome global weakness and currency fluctuations as long as they are present. Diebold stock is down from its 52-week high of $39/share, reflecting the inability of the company to grow over currency issues. The DBD stock has remained in a large sideways range from $25 to $40/share for the past year.

DBD Stock Chart
Dibold YTD chart by Amigobulls

Diebold is an excellent stock for the long-term. However, I don't want to buy the stock at this time. Diebold is a large, growing company, inspite of the fact that it is one of the oldest trading stocks. It will likely be an excellent stock to purchase at some point. But for now, I will avoid the Diebold stock until the situation improves.

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