What to Look For in IBM Earnings
January 17, 2018 by Chris LangeInternational Business Machines Corp. (NYSE: IBM) is scheduled to release its most recent quarterly results after the markets close on Thursday. The consensus estimates from Thomson Reuters are $5.16 in EPS and $22.05 billion in revenue. In the fourth quarter of last year, it reportedly EPS of had $5.01 and $21.77 billion in revenue.
Big Blue has continued to disappoint as the decline in the core IT services business cannot be mitigated by higher stock buybacks and increased dividends. IBM is growing its strategic imperatives efforts in the cloud, artificial intelligence, machine learning and other growth segments. IBM was only expected to generate a return of −2.2% for all of 2017, using its January bull/bear analysis, but its return of −7.6% was even less impressive.
Another consideration for investors is the reign of CEO Ginni Rometty. This has been a disappointment for investors since it began in 2012. In the past five years, IBM had a high above $210 a share at the start of 2013 and it hit a low of $125 in early 2016. With market excitement continuing in 2018, IBM was last seen closer to $162. 24/7 Wall St. has identified Rometty as a candidate that needs to go, including her among the 20 worst CEOs of 2017.
It remains questionable whether IBM really will win under tax reform. While the United States had a nominal corporate tax rate of 35%, and while that rate is dropping to 21%, here is what IBM listed as its rate along with third-quarter earnings: effective GAAP and operating tax rates were 11.0% and 14.7%, respectively, and IBM said then that it expected a full-year effective operating (non-GAAP) tax rate of 15% (plus/minus three points, and excluding discrete items).
Excluding Wednesday’s move, IBM is down about 2% over the past 52 weeks. However, the stock is actually up around 7% year to date.
A few analysts weighed in on IBM ahead of the earnings report:
- Barclays has an Overweight rating with a $133 price target.
- Societe Generale has a Sell rating and a $152 price target.
- BMO Capital Markets has a Hold rating with a $175 price target.
- KeyCorp has a Hold rating.
Shares of IBM traded up about 3% at $168.73 on Wednesday, with a consensus analyst price target of $164.00 and a 52-week range of $139.13 to $182.79.
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