An acquisition has positioned this leading ATM maker to better tap developing markets and higher profits despite the trend toward online shopping.
DIEBOLD NIXDORF INC. (New York symbol DBD; www.dieboldnixdorf.com) took its current form in August 2016 when it acquired Germany’s Wincor Nixdorf AG for $1.4 billion in cash and shares.
The purchase made Diebold the world’s largest maker of automated teller machines (ATMs); over 90 of the world’s top 100 financial institutions use its services.
The new operations also greatly expanded the company’s overseas business. It now gets 50% of its revenue from Europe, followed by North America (23%), Latin America (14%) and Asia (13%).
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Revenue more than doubled Thanks to the acquisition, Diebold’s revenue jumped 106.1%, to $5.0 billion in 2016 from $2.4 billion in 2015. The new Nixdorf operations contributed $1.65 billion to that gain.
The company lost $176.7 million, or $2.56 a share, in 2016. That’s mainly because Diebold had to borrow most of the cash it needed to buy Nixdorf, which pushed up its interest costs. It earned $58.7 million, or $0.88, in 2015.
However, if you factor out costs to integrate Nixdorf and other unusual items, earnings per share rose 46.3%, to $1.58 from $1.08.
As of December 31, 2016, Diebold held cash of $716.8 million. Its long-term debt was $1.7 billion. That’s a high 74% of its market cap. However, the company also expects to cut $160 million from its annual costs by the end of the third year, mainly by consolidating manufacturing plants, warehouses and supply chains. That will give it more cash to pay down debt.
Diebold has also conserved cash by cutting its quarterly dividend 65.2%, to $0.10 a share from $0.2875. The new annual rate of $0.40 yields 1.3%.
Value Stocks: Payment processing represents growth opportunity
The Nixdorf purchase let Diebold expand into more-profitable areas such as payment-processing software. In 2016, services and software accounted for about 60% of the company’s total revenue.
Diebold also recently finalized new joint ventures with two Chinese financial software firms. Those deals will let the company sell more ATMs, kiosks and related hardware to Chinese banks and retailers.
Even with the rise in online shopping and electronic banking, demand for ATMs remains strong. The company expects the global number of ATMs in service will nearly double by 2021, mainly due to improved economic conditions in developing countries. As well, banks in those nations continue to install ATMs as they process transactions much more cheaply than regular tellers.
Diebold expects to earn between $1.40 and $1.70 a share for all of 2017. The stock trades at 19.4 times the midpoint of that range. Earnings in 2018 could reach $2.50 a share; the stock trades at just 12.0 times that forecast.
Recommendation in Wall Street Stock Forecaster: BUY
Thanks for your question. We plan to take a look at Diebold Nixdorf and its outlook in an upcoming issue of our Wall Street Stock Forecaster newsletter.
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I have a question regarding Diebold Nixdorf. If the direction towards a cashless society continues will there be any use for Diebold Nixdorf?
Tom
Thanks for your question. We plan to take a look at Diebold Nixdorf and its outlook in an upcoming issue of our Wall Street Stock Forecaster newsletter.