What to Watch When IBM Reports Later Today

Chris Lange

International Business Machines Corp. (NYSE: IBM) is set to report its most recent quarterly results after the markets close on Tuesday. The consensus estimates call for $2.22 in earnings per share (EPS) and $18.51 billion in revenue. The first quarter of last year reportedly had $2.45 in EPS and $19.07 billion in revenue.

IBM ranks as one of the three best-performing Dow Jones industrial average stocks so far in 2019, and it seems the bulls are calling for it to rise even higher. With its acquisition of Red Hat closing later this year, Big Blue is picking up steam, at least according to one analyst.

Recently, Nomura reiterated a Buy rating for IBM with a $160 price target.

The brokerage firm believes that organic improvement in cloud and artificial intelligence (AI) plus inorganic transformation puts IBM in an incredible position for a return to sustained sales growth. Ultimately this is mixed, where on one hand Nomura is modeling 2% in organic growth in the fourth quarter, while on the other foreign exchange has worsened.

Nomura estimates cloud as a service sales will grow about 20%. IBM is winning new, even cloud native, customers before the Red Hat acquisition. A modest though respectable 15% of respondents in Nomura’s CIO survey use the IBM Cloud. OpenShift should help IBM win new customers and new workloads as enterprises begin to usher mission-critical applications from on-premise to public or private clouds.

Also, Nomura expects “Watson on AWS/Azure/GCP” courtesy of OpenShift to broaden its total addressable market. This plus new leadership should help Watson news flow to recover from an (overstated) low last summer. More than 30% of respondents in the CIO survey already use Watson.

Overall, IBM has outperformed the broad markets with its stock up about 26% year to date. In the past 52 weeks, the stock is actually down 8%.

A few other analysts weighed in on IBM ahead of the report:

  • Credit Suisse has an Outperform rating and a $173 price target.
  • Wedbush has a Hold rating with a $131 price target.
  • BMO Capital Markets has a Market Perform rating with a $147 target.
  • RBC’s Outperform rating comes with a $160 price target.
  • Wells Fargo has a Market Perform rating with a $140 target.

Shares of Big Blue were last seen at $144.29, with a 52-week range of $105.94 to $162.00. The stock has a consensus analyst price target of $143.72.