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Why Diebold Nixdorf Stock Just Dropped 18%

What happened

Shares of Diebold Nixdorf (NYSE: DBD) stock plunged in early trading Tuesday, falling 17.8% through 11:45 a.m. EST after the company "missed" on its Q4 earnings report this morning.

Analysts had predicted that the ATM maker would earn $0.50 per share in adjusted profits on sales of $1.16 billion, but Diebold whiffed on both counts. Total sales for the quarter were just $1.15 billion, and the company's pro forma profits fell short at $0.47 per share.

Image source: Getty Images.

So what

Diebold's sales declined 11% year over year in Q4, with the falloff declining as the year progressed. (Sales for the full year were down 4% at $4.4 billion.) On the plus side, gross profit margins earned on Diebold's sales surged more than 7 full percentage points to 23.5%. (For the year, gross margins were up even higher -- 24.2%).

Problem was, operating costs at the company also surged, keeping Diebold mired in operating losses according to generally accepted accounting principles or GAAP (albeit not as badly as last year) -- even as the company insisted it was earning "adjusted" profits and meeting its "previously announced financial outlook for 2019."

Combined with interest costs on the company's $2.3 billion debt load, this resulted in net losses of $1.60 per share for the quarter (a bit better than last year) and $4.45 for the year (considerably better than last year -- but still a GAAP loss).

Now what

Looking ahead, Diebold warned of further sales declines in fiscal 2020. New guidance for the company predicts sales will run between $4.2 billion and $4.3 billion, thus less than the $4.4 billion collected in 2019 and below analyst predictions besides.

Despite all this, there's one glimmer of hope: With predicted operating cash flow of between $170 million and $200 million, and capital spending expected to be limited to $70 million, Diebold says it will generate somewhere from $100 million to $130 million in free cash flow this year, an improvement on the $93 million generated in 2019 -- and a big improvement over the $163 million in cash burned in 2018.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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