Why Diebold Incorporated Shares Surged

Diebold shares vault higher after the company reports its fourth-quarter results. Should shareholders be pleased with these results or are there causes for concern?

Feb 13, 2014 at 3:58PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Diebold (NYSE:DBD), a self-service solutions and security solutions provider, surged higher by as much as 10% after the company reported its fourth-quarter earnings results before the opening bell.

So what: Diebold, one of the world's largest makers of automated teller machines, reported a decline in revenue of 3% to $811.4 million as adjusted EPS expanded to $0.57 from $0.43 in the year-ago period. These results were mixed based on what the Street had been looking for with revenue $10 million ahead of estimates and EPS $0.02 shy of estimates. Security product revenue, especially election systems sold to Latin America, weighed on Diebold's top-line. Looking forward, though, Diebold reaffirmed its previous guidance of $1.65-$1.85 in adjusted EPS with revenue up in the low single digits.

Now what: Given that Diebold witnessed a close to 5% decline in full-year revenue, the simple fact that its top line will grow in the low single digits is enough to encourage investors. Let's also recall that no publicly listed company has a longer streak of raising its annual dividend than Diebold, so it's a highly respected stock selection among income investors. The fact that it reaffirmed its guidance is a strong indication that its dividend could rise again this year. One concern I do have, however, is that Diebold has missed the Street's estimates in four of the past five quarters. I'm certainly willing to give the company a bit of a break given that its security products can be very cyclical, but long-term investors should certainly be aware of that fact before diving into Diebold.

Diebold may be rallying strongly today, but it'll be hard-pressed to match the potential gains from this top stock in 2014
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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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