IBM's Earnings: Short-term income pain must be translated into service growth
International Business Machines Corp. must show how short-term pain of declining income will pay off, as the company continues to shift towards a more service-oriented business.
IBM
IBM, -0.31%
is scheduled to report profit after the quarter after the close of trading on Tuesday.
David Grossman, analyst David Grossman, who buys at IBM, says the first quarter is usually seasonally weak, so he does not expect any changes in IBM's outlook. Last profit report, the company forecast earnings of "at least $ 1[ads1]3.90" a share for the year.
Read: IBM invaded San Francisco to prove that it is still a technological innovator
"The cognitive / software segment should be stable (flatish +/-) given that it comes out of a very Strong transactional 4Q18 and will continue to include pending departures, which are a headwind for growth, says Grossman.
Departures and completion of IBM's acquisition of Red Hat Inc.
RHT, -0.03%
to vomit their hybrid cloud deals should improve the fundamentals of the cognitive business, he said.
Earnings: Of the 18 analysts examined by FactSet, IBM is expected to post an adjusted earnings of $ 2.22 per share on average, compared to $ 2.45 in the quarter. The current estimate is down from the $ 2.26 share expected at the beginning of the quarter. Estimate, a software platform that uses crowdsourcing from hedge fund managers, brokerage firms, analysts, and others, requires revenue of $ 2.27 per share.
Revenue: Wall Street expects a turnover of $ 18.47 billion from IBM, a decrease of 3.2% from $ 19.07 billion in the quarter, according to 17 analysts asked by FactSet. Current analyst expectations have fallen from $ 18.78 billion at the beginning of the quarter. Estimates expect revenues of $ 1875 billion.
Analysts surveyed by FactSet expect revenues in cognitive solutions to fall 2.9% to $ 4.188 billion from last year. The technology service and revenue on the ship platform is expected to fall by 4.4% to $ 8.25 billion. The technology service and the ski platform include the IBM Cloud, formerly known as Bluemix.
Revenue from worldwide services is expected to increase 0.4% to $ 4.19 billion, and system revenue is expected to fall 8.6% to $ 1.37 billion from the previous year. Global business services include consulting for the modernization of business design and business and cloud applications, while the system business includes operating system software and the company's mainframe business, including IBM's z14 series servers.
Stock Movement: IBM shares have achieved more than 17% since its previous earnings report, as the company estimates annual earnings before Wall Street estimates. For comparison, the Dow Jones Industrial Average
DJIA, -0.10%
has increased 8.3%, S & P 500 index
SPX, -0.06%
has achieved 10.4% and the technological heavy Nasdaq Composite Index
COMP, -0.10%
has risen more than 14% in that time.
What analysts say: Of the 21 analysts that cover IBM, have six purchase or overweight values, 13 have team ratings and two have sales or underweight values, with an average price target of $ 143.81.
Wedbush Analyst Moshe Katri, who has a neutral rating and a $ 165 prize, said he believes that IBM's performance continues to be affected by cannibalization in the older software / services, which we associate with about 70% of revenue. "
Katri said the management is aggressive in trying to shift revenue into high-growth services, but he needs to see more.
" In order for us to become more constructive on the name, we need to see indications that the results of stand-alone IBM has stabilized, Katri said. "The closest example of a vendor who has succeeded in turning its revenue base into digital, both organic and through acquisition, is better than Accenture."
Katri said quarterly service ordering and total reported feedback levels, along with what the company says about IT spending trends, will be important.
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