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IBM will report earnings Thursday.
David Ramos / Getty Images
IBM‘s
earnings report, scheduled for Thursday, to be more consistent than usual. Investors will listen for more information on the planned output of the $ 19 billion-led infrastructure services industry, which is expected to be completed by the end of the year.
IBM (ticker: IBM) did not provide guidance for the fourth quarter, citing the uncertainties associated with the Covid-19 pandemic and the associated economic downturn. Wall Street analyst consensus for the quarter calls for $ 20.6 billion in revenue, and non-GAAP earnings of $ 1.79 per share. That would be down from $ 21.8 billion and $ 4.71 a year ago.
The Street is planning a March quarter revenue of $ 17.6 billion, down a hair from a year ago, with non-GAAP profits of $ 1.65 a share, compared to a $ 1.84 a year share.
Earlier this month, IBM selected Martin Schroeter, a nearly three-year IBM veteran, to run the anonymous spinoff business. But he has not yet revealed many other details about the proposed deal.
Analysts are hoping IBM will start issuing financial guidance, after it stopped use in April as the pandemic progresses. Evercore ISI analyst Amit Daryanani writes in a research note that the “major focus” will be on the company’s 2021 outlook for both per-share earnings and free cash flow, although he admits that the an upcoming spinoff will prevent IBM from providing clear direction. IBM expects to generate $ 6 billion to $ 8 billion in free cash flow this year, down from $ 12 billion in the 2019 calendar year.
As for the December quarter, Daryanani says the consensus earnings forecast is possible, but fears a potential loss of revenue, and projects $ 20.3 billion for its main line. The analyst is concerned that the spinoff plan creates the potential for the focus of regulators to be shifted from day-to-day work, which could impact revenue.
UBS analyst David Vogt wrote in a research note this week that he plans to undergo a major restructuring at IBM post-spinoff, in which the company could cut its head count by as much as 15% to 20%, cutting billions in costs in the process. He also believes IBM could be ahead of their spinoff plan.
Vogt sees fourth-quarter earnings of $ 1.62 a share, very short of the Street consensus. Vogt maintains its Neutral rating and the $ 125 price target on the stock, noting that it is concerned about IBM’s long-term revenue growth, even after a cost cut in an environment “challenging” economic.
At the same time, Stifel analyst David Grossman has a more optimistic view – he will maintain his Buy rate and the $ 147 target price to earnings. It sees IBM as “a value stock with an attractive yield,” around 5%. He says the stock could generate higher multiples on “better performance” and the expected spinoff. Grossman says his sum-of-parts calculation indicates a share price in the $ 150 to $ 180 range over the next 12 months, with even “middle of the road” executed by management IBM.
“Key indicators of success” include signs that IBM’s legacy software business is returning to growth after Covid, a re-acceleration in the company’s global business services sector, and operational and financial improvements at the spinoff intended. he writes. For the fourth quarter, Grossman sees revenue of $ 20.9 billion and earnings of $ 1.67 a share.
Write to Eric J. Savitz at [email protected]