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Two analysts who monitor companies that make ATMs recently delivered mixed messages about 2008 and 2009 earnings estimates for NCR Corp. and Diebold Inc.
Gil Luria, an analyst with Los Angeles-based Wedbush Morgan Securities Inc., reduced 2008 and 2009 earnings estimates for NCR and Diebold, two of the world's largest ATM manufacturers, because he expects the worldwide economic downturn to cause global sales to decelerate even faster than anticipated.
Matt J. Summerville, an analyst with Cleveland-based KeyBanc Capital Markets Inc., however, maintained 2008 earnings estimates for both NCR and Diebold, but he cut the companies' 2009 earnings estimates.
Luria and Summerville, however, retained "buy" ratings for both companies, although Luria cut NCR's "strong buy" rating to "buy."
"We believe NCR remains a relatively safe investment that we believe controls its ability to exceed expectations and grow earnings through cost cuttings and share buybacks," he says.
Luria, however, reduced his estimate for NCR's 2008 earnings per share to $1.67 from $1.73 and his 2009 earnings-per-share estimate to $1.79 from $1.90.
He cut his estimate for Diebold's 2008 earnings per share to $2.58 from $2.63 and his 2009 earnings per share estimate to $2.64 from $2.76.
"We believe Diebold will continue to grow earnings even in a tough environment," Luria says.
Luria and Summerville wrote their reports after interviewing NCR and Diebold executives who attended the BAI Retail Delivery Conference in Orlando, Fla.
NCR and Diebold are the Ohio twins.
NCR, the world's largest ATM manufacturer, based on 2007 shipments has its headquarters in Dayton.
Diebold, the world's third-largest manufacturer based on 2007 shipments, central offices are in Canton.
Luria and Summerville reached similar conclusions in some areas and different conclusions in others about the companies, following the conference.
Several large banks, namely Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co., still are moving forward with installations of intelligent-deposit ATMs that do not require envelopes, Luria and Summerville agree.
They also agree that U.S. small and regional banks are more cautious and not spending their dollars purchasing intelligent-deposit ATMs, which studies have shown to increase deposit activity at the ATM to 60% from 10%.
"In some markets, this would provide the institution with a sizeable return on investment," Summerville says.
He compared the cost of building a new bank branch and installing full-function intelligent-deposit ATMs that would serve bank-customer needs.
Summerville estimates a new branch would cost $2 million to $2.5 million versus the price of deploying a few full-functioning intelligent-deposit ATMs, which says would cost approximately $100,000.
Despite the cost benefits of intelligent deposit ATMs, mostly large banks and some credit unions are investing in the machines, Summerville writes.
Banks also are tightening or are suspending spending altogether because they are preparing their budgets for 2009, Luria says.
International markets for ATM sales also are much more difficult to figure.
"In emerging markets, like Russia, it's harder to predict how much the banks will spend purchasing ATMs because of the economic turmoil there," he says. As a result in the past two to three weeks, ATM makers have experienced a noticeable deterioration in ATM placements., Luria says. This downturn cast a pall over the individuals who traditionally attend the BAI show, as many executives who normally would attend the conference skipped it. Summerville maintained Diebold's 2008 earnings estimate of $2.70 per share but cut the manufacturer's 2009's earnings estimate.
"It is more prudent to set more conservative earnings per share estimates for 2009 and a more realistic price target for shares given the current market environment," Summerville writes. He reduced 2009 earnings per share estimate to $2.70 from $2.85.
As for NCR, Summerville maintained the manufacturer's 2008 earnings per share guidance of $1.72, but he cut the company's 2009 earnings per share estimate to $1.75 from $2. "We believe it is more prudent to set more conservative earnings per share estimates for 2009 and a more realistic price target for NCR shares given the current market environment," Summerville says. ATM
