* What: NCR, Diebold fourth-quarter results
* When: Starting Feb. 3 with Diebold
* Brazil contract to offset core market weakness for
* Investors seek update on NCR's pension challenge
By Deepti Govind and Saqib Iqbal Ahmed
BANGALORE, Feb 2 If there's any industry that
has mirrored the decline of the financials in the last two
years, it's the automated teller machine (ATM) industry.
And even though banks have gradually started posting
profits, it will take some time before ATM makers ring in the
So when NCR Corp (NCR.N) and Diebold Inc (DBD.N), the two
biggest ATM manufacturers, report quarterly results this week,
investors will be looking for signs of a thaw in their end
"Some of the regional banks are consolidating... and branch
closings are going to make it difficult for Diebold to generate
top-line growth in their core ATM and security business in
2010," Sidoti & Co analyst Michael Saloio said.
In 2008, about 95 percent of Diebold's sales were tied to
the financial self-service and security industries.
Seasonally, the fourth quarter is strong for Diebold and
should hold good even in a weak year, analyst Wedbush Morgan
Securities analyst Gil Luria said.
The weakness in the financial segment will be partly offset
by a large contract win in Brazil to supply electronic voting
"The contract could contribute 9 cents to 10 cents to 2010
earnings," Saloio said.
Analysts expect Diebold to earn 41 cents a share on revenue
of $742.3 million for the fourth quarter, according to Thomson
PENSION WOES FOR NCR
While Diebold's Brazilian contract win might offer some
solace, for larger rival NCR an under-funded pension and no
near-term signs of recovery in retail markets will only
compound its woes.
NCR also makes self-service check-out kiosks for department
stores and supermarkets.
"NCR shares will continue to reflect a significant discount
to peers and trade mostly based on macro trends as long as NCR
owns its pension program," Luria said in a note to clients.
NCR trades at a multiple of about 24 times its forward
earnings, compared with a multiple of 42 for the broader IT
NCR has about $1 billion of under-funded pensions,
seemingly the big overhang on its stock, which has mostly
remained stagnant in the $11-$12 range in past three months.
"A full pay-down of the pension gap and spin-off of the
pension program would eliminate negative effects," Luria wrote.
Limited visibility on end-market capital spending,
particularly in the retail industry, which contributes about 40
percent of revenue, remains another area of concern for NCR.
"2009 was a very bad year for selling into retail, and we
will have to wait and see to get any positive signs for 2010,"
Investors are also likely to keep an eye on NCR's DVD
kiosks business, as this is the first quarter when the company
could talk about results from the business.
NCR entered the entertainment kiosks market in 2006 and
joined hands with Blockbuster Inc BBI.N in April 2009 to
provide DVD rental kiosks. [ID:nN22260174]
Analysts expect a fourth-quarter profit of 26 cents a share
on revenue of $1.28 billion for NCR.
(Reporting by Deepti Govind and Saqib Iqbal Ahmed in Bangalore
; Editing by Jarshad Kakkrakandy)