11:36 AM, Jul 18, 2017 — International Business Machines (IBM) is expected by analysts to report year-on-year declines in adjusted earnings per share (EPS) and revenue for the second quarter when the technology company releases the results after Tuesday’s market close.
For IBM’s second quarter adjusted EPS, the mean estimate of analysts polled by Capital IQ is $2.74, down from $2.95 a year earlier. The analysts’ mean estimate for the quarter’s revenue is $19.46 billion, down from the year-earlier period’s $20.24 billion.
Citing a “de-risked” outlook for the quarter and improved foreign-exchange backdrop, RBC Capital Markets said it expects IBM to report results in line with-to-modestly above the Street’s consensus earnings view. RBC’s estimate for adjusted EPS matches the Street view while its estimate for revenue is $19.3 billion, slightly below analysts’ consensus view.
RBC said it expects the focus to rest on four key factors: Performance of IBM’s “strategic imperatives,” stabilization of gross margins given six consecutive quarters of gross-margin declines, potential for changes and incremental details surrounding the 2017 outlook, and updates on the Watson/artificial intelligence opportunity.
The firm said while it is encouraged by a more favorable June-quarter setup and 2017 EPS guidance that reflects year-on-year pre-tax income growth, “we think investors may await more tangible signs of achieving these targets before getting positive on the name.” RBC thus maintained its investment rating on the stock at sector perform. Its price target on the stock is at $165 per share, which is above the stock’s Monday closing price of $153.01.
RBC’s overall investment summary on IBM is that the company “represents the best mix of technology businesses in the enterprise segment,” but its “top-line growth should remain limited near-term, which could result in the company’s focusing exclusively on share buybacks and margin mix to boost non-GAAP EPS growth.” The firm has been advising that its clients remain on the sidelines “until better signs of positive revenue growth emerge.”
Companies: International Business Machines Corporation
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