Is It Time To Buy This Tech Giant Ahead Of Earnings?
Photo Credit: Martin
International Business Machines (IBM) Information Technology - IT Services | Reports October 17, After Market Closes
Key Takeaways
- The Estimize consensus is calling for earnings per share $3.22 on $19.01 billion in revenue, 1 cent1 higher than Wall Street on the bottom line and right in line on the top
- IBM’s continued focus on cloud computing, Big Data, analytics and mobile are expected to lead the company into the future
- Near term headwinds including sluggish PC market, weaker IT spending, currency headwinds should takes it toll on earnings
- What are you expecting for IBM? Get your estimate in here!
IBM is scheduled to release its third quarter report this Monday after the market closes. There has been pressure for the company to turn positive growth which has been negative for over 8 quarters. A majority of this downturn can be blamed on sluggish PC sales and the ongoing transition to the cloud. Early signs points to another weak quarter as IBM continues its downward momentum.
The Estimize consensus is calling for earnings per share of $3.22 on $19.01 billion in revenue, roughly 1 cent higher than Wall Street on the bottom line and right in line on the top. Compared to a year earlier that represents a 4% decline in profitability and 1% in sales, marking yet another quarter of declines. Fortunately investors have overlooked weak earnings and continue to buy the stock. Shares are up 12% year to date and historically don’t move in the 5 days following an earnings report.
Cloud computing was one of the lone bright spots in the second quarter report. Cloud as a service revenue for the quarter increased 50% to 6.7% while overall cloud revenue was up 30%. Analytics, mobile and security sectors have been just as impressive, consistently posting double digit gains on a year over year basis. Cloud computing remains one of the most competitive markets with Amazon, Microsoft and Google leading the charge. This could a problem if IBM doesn’t expand its footprint in the space.
IBM continues to invest heavily in high growth markets including Big Data, business analytics and cloud computing as its legacy business have struggled. These markets are expected to carry earnings in the future but in the meantime they are expensive and time consuming. This transition period coupled with sluggish PC sales and IT spending have amounted to consistently negative growth. IBM is expediting the process through strategic acquisitions. Since the turn of the millennium the company has purchased over 150 companies that have led to incremental revenue gains.
The relative strength of the dollar and Brexit uncertainty should prove to be another roadblock moving forward. IBM has a large footprint in Europe which leaves them susceptible to any policies that may impact currencies or trade in the region.
Disclosure: Each week, Forcerank runs a variety of games covering different industries. What we have found, is that the highest ranked companies in their ...
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