JPMorgan Upgrades Diebold After Visiting Ohio Headquarters

In a report published Thursday, JPMorgan analyst Paul Coster upgraded the rating on

from Underweight to Neutral, while raising the price target from $33 to $39. The analyst expects the company to return to revenue growth in the mid single digit percentage range by mid-2016. Following a visit to the company's headquarters in Ohio on June 3, the analyst expressed confidence regarding Diebold's medium term growth prospects, driven by its new ATM product cycle through a new software platform. This has been timed to coincide with the upgrade cycle of the retail banking segment. "The company's expense-containment program should also kick into a higher gear toward the end of 2015, once some frontloaded re-investment is out of the way," Coster said. Most of the back office integration of

has been completed and is expected to bring cost savings worth about $8-$10 million per annum. The analyst also expects opex costs to witness "a nice comp heading into 2016," while also expecting "PF operating margins to expand ~260bps from current levels by the end of FY17." According to the JPMorgan report, "The CEO spends the majority of his time meeting with key clients, pitching cost reductions at branches driven by ROI analysis, and security solutions that solve skimming issues. India and China remain top priority markets." In addition, the sales force has been upgraded, with senior level executive responsible for regional discussions with the CTOs, CIOs and Heads of the retail banking operations of global clients. The analyst believes that any pullback in the stock would present an attractive investment opportunity.