Diebold (NYSE: DBD ) lives to make life easier for all of us with a variety of "self-service" machines like ATMs. Too bad, then, that it can't find a way to translate humankind's basic love of convenience into solid double-digit growth.
Looking back at past Motley Fool articles on Diebold, it seems like there's always an excuse for why the numbers aren't strictly comparable with the year-ago period and/or why the numbers weren't quite as good as they should be. Well, I don't want to play that game.
Revenue for the first quarter was up 8.4% as reported and 6.5% on a constant-currency basis. The financial segment (ATMs, mostly) grew the top line at a 4.9% rate (again, constant-currency), with 10% product growth offset by 1.2% service growth. Security revenue growth was much stronger at 19.6%, and election system revenue was down 60.6%.
A restructuring charge sent gross margin down for the quarter, as well as operating margin. Reported operating profit declined about 7% from last year because, in part, of that restructuring charge. Earnings per share were down year over year including the charge, but up about 12.5% without the charge.
In lowering guidance for the full year, Diebold management said it believes rising fuel costs would hurt results by about $0.02 a share. Now, I really don't know what to say about that. If a company like Caterpillar (NYSE: CAT ) can overcome historic price increases in steel, tires, and energy and still post a fantastic quarter, I'm not sure how or why fuel prices should hurt Diebold to that extent.
The fact is, I'm rather cranky with respect to Diebold. I don't like what seems to be an ongoing cycle of "yeah, buts" -- as in, "yeah, business is good and our products are competitive, but this or that hurt results." The fact is, if you look back, you see a company that has grown revenue at a compounded rate of about 13%, book value at a rate of about 10%, and profits at a rate of about 12%.
That's not bad at all, but recent growth trends have been pretty anemic. What's more, the company seems to be budgeting restructuring charges into its ongoing guidance -- something that just irks me and shows investors that "one-time items" often aren't.
Clearly, then, I'm not going to be favorably inclined toward this stock. While I can appreciate reasons for optimism about the business -- cash-flow generation is good, electronic voting is the future, and the new Opteva line seems to be selling well -- I would prefer to see solid double-digit earnings growth without having to add back charges and items before I get more excited about owning a piece of this business.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).