IBM Sinks Despite Earnings Beat

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International Business Machines Corp. (NYSE: IBM) reported third-quarter financial results after markets closed on Monday. The company said that it had $3.29 in earnings per share (EPS) and $19.23 billion in revenue. There were consensus estimates from Thomson Reuters that called for $3.24 in EPS on $19.00 billion in revenue. In the third quarter of last year the company posted $3.34 in EPS and $19.28 billion in revenue.

For 2016 guidance, IBM continues to expect EPS of at least $13.50, which compares to the consensus estimates calling for $13.51 in EPS on $79.59 billion in revenue for the 2016 full year.

In terms of its segments IBM reported:

  • Cognitive Solutions reported revenues of $4.24 billion with a gross profit margin of 80.4%.
  • Global Business Services had revenues of $4.19 billion with a gross profit margin of 28.8%.
  • Technology Services & Cloud Platforms reported revenues of $8.75 billion with a gross profit margin of 42%.
  • Systems had revenues of $1.56 billion with a gross profit margin of 51.1%.
  • Global Financing had revenues of $412 million with a gross profit margin of 37.8%.

IBM’s free cash flow was $2.4 billion in the third quarter. IBM returned $1.3 billion in dividends and $0.9 billion of gross share repurchases to shareholders. At the end of September 2016, IBM had $3.0 billion remaining in the current share repurchase authorization.

On the books, IBM’s cash and cash equivalents totaled $9.96 billion at the end of the quarter, versus $8.19 billion at the end of 2015.

Ginni Rometty, IBM’s board chair, president and chief executive, commented:

IBM’s third-quarter performance, led by continued double-digit growth in our strategic imperatives, is a testament to our leadership in cognitive solutions and cloud. Our ability to apply deep expertise and breakthrough technology, led by Watson and the IBM Cloud, to massive amounts of data is enabling us to build new markets and transform industries. Whether it is banks implementing IBM blockchain solutions, hospitals leveraging Watson to fight cancer, or retailers using cognitive apps built on the IBM Cloud to transform the customer experience, clients across all industries are tapping into a new kind of innovation value from IBM.

Shares of Big Blue closed Monday at $154.77, with a consensus analyst price target of $154.12 and a 52-week trading range of $116.90 to $165.00. Following the release of the earnings report, the stock was initially down 2.7% at $150.53 in the after-hours trading session.