DIEBOLD INC. $25 (New York symbol DBD; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 65.2 million; Market cap: $1.6 billion; Price-to-sales ratio: 0.7; Dividend yield: 4.6%; TSINetwork Rating: Average; www.diebold.com) is a leading maker of automated teller machines. It also makes safes and vaults.
Diebold is buying German ATM maker, Wincor Nixdorf AG, for $1.8 billion in cash and shares. The purchase will make Diebold the world’s largest maker of ATMs, with roughly 35% of the global market. It should complete the purchase in the second half of 2016.
Meantime, Diebold’s revenue in the three months ended March 31, 2016, fell 11.3%, to $509.6 million from $574.8 million a year earlier. Overseas markets supply 60% of its revenue, so the high U.S. dollar hurts the contribution of its foreign operations. Excluding exchange rates, revenue fell 6.1%.
Diebold earned $20.4 million, or $0.31 a share. But without unusual items, it lost $0.03 a share in the latest quarter. A year ago, it lost $7.3 million, or $0.11.
The company will borrow most of the funds it need to buy Wincor. That will raise its long-term debt to $2.2 billion, or a high 1.4 times its market cap.
However, adding Wincor will more than double Diebold’s annual revenue to $5.2 billion. The company also expects to cut its annual costs by $160 million by the end of the third year. Moreover, buying Wincor will let Diebold expand into faster-growing areas such as payment-processing software. In the latest quarter, gross profits from services were 32.1% of revenue compared to 17.7% for hardware sales.
Excluding Wincor, Diebold will likely earn $1.53 a share in 2016. The stock trades at 16.3 times that forecast. With Wincor, earnings in 2017 could reach $2.13 a share; the stock trades at just 11.7 times that forecast.
The company continues to pay quarterly dividends of $0.2875 a share, for an annualized yield of 4.6%. However, after it buys Wincor, Diebold plans to cut the dividend by 67%.
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