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4-Traders Homepage  >  Equities  >  Nyse  >  Diebold Nixdorf Inc    DBD

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Are ATM-manufacturers' fortunes finally on the upswing?

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03/23/2017 | 10:11pm CEST

After undertaking major business reorganizations and transactions, executives from both NCR Corp. and Diebold Nixdorf kicked off recent Q4 and full-year earnings calls expressing confidence in their respective enterprises and prospects.

In a departure from past calls, it was President and COO Mark Benjamin, rather than Chairman and CEO Bill Nuti, who presented the earnings overview for NCR:

Overall, NCR had a great 2016, and I want to recognize our employees and thank our customers as well as our partners for the important role they play in our success. We had strong performance in virtually every metric we track but particularly revenue, earnings and free cash flow. Throughout 2016, a common theme for NCR was the underlying momentum in our business, driven by improved operational execution and strategic traction with our omnichannel focus, which led to strong revenue trends and cash flow generation.

In his first earnings call presentation since the combination of Diebold Inc. and Wincor Nixdorf, CEO Andy Mattes enthused over the acquisition and its expected result:

I'm particularly proud of the team as we completely reshaped the company in 2016 and laid the foundation for our future. We acquired Wincor Nixdorf to improve our business portfolio, broaden our scale, expand our leadership in services and software, and increase our capacity to innovate and collaborate with our customers. We also divested our North America Electronic Security business and launched two new joint ventures in China. These strategic achievements have had a profound impact on the company.

Diebold Nixdorf: Legacy earnings, future outlook

It will be some time, though, before the industry will be able to gauge the true profundity of the impact from Diebold's acquisition of Wincor Nixdorf.

As Mattes observed, a year-over-year comparison of Diebold Inc. and Diebold Nixdorf "won't be very meaningful."

Looking only at Diebold earnings, results were in line with guidance, Mattes said, though the top line results were "a bit lighter than expected."

This he attributed to under performance in the EMEA region, where overlap between the legacy companies is greatest and integration efforts are most extensive, "which unfortunately resulted in typical, near-term disruption in the sales organization," according to Mattes.

Additionally, new regulations in China in 2016 shut out any ATM vendor that did not have a joint partnership with a domestic provider.

Largely as a result of these issues, organic non-GAAP revenue decreased 3 percent in constant currency during the fourth quarter and was down 4 percent for the full year, according to Diebold Nixdorf CFO Chris Chapman.

As for 2017 outlook, Chapman said the company is targeting revenue of $5 billion to $5.1 billion, representing flat to 2 percent growth compared with pro forma 2016 revenue. Earnings per share for the year is expected to fall between $1.40 and $1.70.

The 2017 forecast is supported by a $1.1 billion product backlog, $2 billion in recurring services and software revenue and a growing sales pipeline, Chapman said, adding "current market sentiment seems to be improving."

Additionally, Mattes said, the company expects to realize approximately $40 million in cost synergies this year from the business combination.

"Looking forward, we are an opportunity-rich organization," he said. "We have some heavy lifting in front of us, but I feel really good about the leadership team and our collaborative spirit -- 2017 is all about executing our integration plans and delivering innovative solutions to our customers."

NCR: Continued momentum, bullish outlook

NCR is flying somewhat higher than Diebold Nixdorf, unencumbered by the massive task of integrating two companies on different continents.

Full-year earnings in 2016 exceeded expectations; at $6.5 billion, revenues rose 7 percent on an adjusted constant currency basis. To some extend, it's an indication the company is making good on its ambition to accelerate growth in the high-margin software market.

In Q4 2015, NCR secured an $820 million investment deal with the Blackstone Group LP expressly for this purpose; by Q4 2016, the company had boosted software revenue 9 percent, including software license growth of 21 percent and cloud growth of 10 percent.

The full-year net annual contract value for cloud, which the company said is a leading indicator of future cloud revenue, came to $70 million, up 79 percent from $39 million the prior year.

Software sales now account for 69 percent of NCR's total operating income in 2016, with a margin of 31.3 percent.

Revenue from services in Q4 also saw an increase -- from $590 million in 2015 to $598 million in 2016, a 3 percent improvement in constant currency.

In hardware, Q4 sales grew from $631 million to $702 million, factoring out income from the company's now-divested interactive printer solutions division.

Hardware now represents the smallest portion of operating income for NCR, but remains a key aspect of the business, as it helps to drive higher-margin software sales.

Within the hardware category, ATM sales dominated revenues, contributing $385 million in Q4 2016, an improvement of 25 percent (29 percent in constant currency) over $307 million in Q4 2015.

According to CFO Bob Fishman, ATM revenue in the quarter was driven by strong customer demand for new products, acceptance of newly introduced omnichannel-ready products and a strong roll out of backlog products.

The company's guidance for the current year reflects leadership's confidence that momentum built in 2016 will continue through 2017. Fishman announced  software is expected to grow 6 to 8 percent on a constant currency basis, with services up 3 to 5 percent and hardware gaining 5 to 8 percent.

The company anticipates total revenues of $6.6 billion to $6.7 billion, a year-over-year gain of 5to 7 percent (adjusted for currency headwinds and excluding the IPS divestiture), and expects non-GAAP earnings per share of $3.25 to $3.35, a 9 to 12 percent improvement over 2016.

Said Benjamin, "Our market position, strong backlog and key business metrics support our guidance, and the entire NCR team is excited about the year ahead."

photo: istock

Copyright © 2017 Networld Media. All rights reserved., source Industry News

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Financials ($)
Sales 2017 5 033 M
EBIT 2017 287 M
Net income 2017 7,40 M
Debt 2017 1 106 M
Yield 2017 -
P/E ratio 2017 34,99
P/E ratio 2018 18,13
EV / Sales 2017 0,67x
EV / Sales 2018 0,61x
Capitalization 2 248 M
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Diebold Nixdorf Inc Technical Analysis Chart | DBD | US2536511031 | 4-Traders
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Consensus
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Buy
Mean consensus OUTPERFORM
Number of Analysts 7
Average target price 34,0 $
Spread / Average Target 14%
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Managers
NameTitle
Andreas Walter Mattes Chief Executive Officer & Director
Eckard Heidloff President
Henry D. G. Wallace Non-Executive Chairman
Jürgen Wunram Chief Operating Officer & Director
Christopher A. Chapman Chief Financial Officer & Senior VP
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