IBM, When Solid Is Not Solid Enough (IBM)

DJIA component International Business Machines Corp. (NYSE: IBM) is out with earnings for its fiscal 2009 year-end and Q4 period.  The report looks to leave something for everyone here.  Big Blue posted earnings of $3.59 EPS and revenues of $27.23 billion.  Thomson Reuters had estimates for this quarter pegged at $3.47 EPS and $26.96 billion in revenues. IBM’s total gross profit margin was 48.3% in the 2009 fourth quarter; and the tax rate in the fourth-quarter 2009 was 24.6% compared with 23.8% in the fourth quarter of 2008.

As far as guidance, IBM said it is now looking for at least $11.00 per share for 2010.  Estimates are $10.88 EPS for fiscal 2010 on revenues of $98.64 billion.  The company’s guidance at the last quarterly report was raised to being well ahead of pace for 2010 of $10.00 to $11.00 EPS.  The company is offering the same implied tax rate in 2010 at 26% to 26.5% versus 26% for all of 2009.  IBM ended 2009 with $14.0 billion of cash on hand.

The Americas’ fourth-quarter revenues were $11.1 billion, a decrease of 3% (6% adjusting for currency) from the 2008 period. Total Global Services revenues increased 2% (down 5%, adjusting for currency).  Global Technology Services segment revenues increased 4% (down 3% adjusting for currency) to $10.1 billion.

The backlog is what we use to track the company’s ability to make its forward numbers, and that came in at $ billion today.  The estimated services backlog at December 31 was $137 billion at actual rates compared with $134 billion at September 30, 2009, and compared with $130 billion at year-end 2008.

The good news is that this was a solid report.  The bad news is that this might not be solid enough.  The stock has caught up very close to the average analyst target of almost $137.00 and shares are effectively at multi-year highs.  Shares closed up 1.8% at $134.14 and the stock hit $134.25 for a new 52-week high today.  Shares are trading down close to $133.20 in the after-hours session.

After the run-up we have seen in most major stocks, it is not surprising that today’s figures have failed to initially cause and serious added excitement.

JON C. OGG