Diebold's Turnaround Is Taking Too Long, Credit Suisse Says

Diebold Nixdorf Inc DBD, a financial self-service, security and services company, has "struggled" over the past year but Credit Suisse stuck with it...until now.

The Analyst

Credit Suisse's Paul Condra downgraded Diebold Nixdorf from Outperform to Neutral with a price target lowered from $19 to $15.

The Thesis

Diebold Nixdorf ended 2017 with revenue of $4.6 billion, which fell short of the $5 billion the company guided to at the start of the year, Condra said in a note. Exiting 2017, the case could have been made that many of the negatives were priced into the stock and multiple tailwinds would offer a favorable set-up. The company's first-quarter earnings, however, makes it clear "more downside could be found."

While Diebold Nixdorf's first-quarter revenue miss of $1.064 billion versus expectations of $1.08 billion was "modest," the 12 cent per share loss versus expectations for 1 cent per share profit was "more substantial." The EPS miss not only casts doubt management can achieve its previously stated 2018 targets, but there's "little room for error" to attain even the low end of the guidance.

The company continues to face secular challenges and the "ongoing turbulence" from a management turnover, Condra said. Restructuring initiatives have yet to be clarified and implemented, which implies it may take longer than expected for any catalysts to play out. The analyst said investors could expect "continued choppiness" in the near term and management needs to communication "measurable proof points" before becoming constructive on the stock.

Price Action

Shares of Diebold Nixdorf were trading lower by 1.4 percent Friday at $11.88.

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