How Investors Are Set to Interpret IBM’s Crucial Earnings Report

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International Business Machines Corp. (NYSE: IBM) is on deck to report its fourth-quarter earnings after the markets close on Thursday. While there is a lot of focus on IBM’s earnings and revenues, investors may have to weigh many other issues equally or even more than the actual earnings report on a simple “meet, beat or miss” basis that other companies are usually judged by.

The consensus estimates from Thomson Reuters are $5.17 in EPS and $22.05 billion in revenue. In the fourth quarter of last year, the company reportedly had EPS of $5.01 and $21.77 billion in revenue. What matters here is that if IBM’s revenues match or beat estimates, it will break a multiyear slide in quarterly revenues on a year-over-year basis. If that occurs, it may change how IBM is reported on by the media and how it is viewed by investors going forward.

If IBM offers up 2018 guidance, the $78.63 billion in revenues of 2017 would go up to $78.81 billion in 2018. And the expected EPS of $13.81 in 2017 would grow to $13.92. IBM may disclose charges tied to repatriation, as it has a place among the 16 companies with a total of $1 trillion cash.

It is no secret whatsoever that Big Blue has continued to disappoint with earnings over and over, as its core IT services business has not been overcome by IBM’s strategic imperatives of cloud, artificial intelligence, machine learning and other growth segments. Blockchain represents a huge opportunity for IBM. Big stock buybacks and increased dividends have also only yielded so much, considering how much IBM has underperformed against other U.S. technology giants. IBM shares are down slightly over a five-year trailing period, versus a 90% gain in the Dow Jones Industrial Average during that time.

IBM’s disappointment continued in 2017. The stock was only expected to generate a return of −2.2% for all of 2017 using its bull/bear analysis at the start of last year, but its return of −7.6% was even less impressive.

Another consideration for investors is recent and likely management changes. 24/7 Wall St. has been rather critical of the reign of CEO Ginni Rometty, and the stock performance alone should merit more than simple questions about how and why IBM’s board of directors approved such a large bonus for her in 2017. 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. Rometty was included in the list of the 20 worst CEOs of 2017.

On top of the CEO issue at IBM, the company just named a new chief financial officer. The timing of the news was unusual, and it was given very little coverage relative to what the longer-term and near-term implications may be. James Kavanaugh was named as the new CFO, replacing Martin Schroeter who is taking a new role as IBM’s senior vice president of global markets.