International Business Machines Corporation (NYSE: IBM) has managed to beat its earnings targets.  The technology services and equipment giant reported non-GAAP earnings growth of 18% to $3.09 EPS vs $3.03 estimates from Thomson Reuters and its reported revenues were $26.67 billion versus estimates of $25.35 billion.  Even the GAAP earnings were up 15% at $3.00 per share.  The big figure we often look at is the services backlog, which is up $15 billion to $144 billion.

As far as the units these are as follows:

• Software revenue up 17%, up 10% adjusting for currency;
• Systems and Technology revenue is up 17%, up 12% adjusting for currency:
• System z mainframe revenue up 61%,
• MIPS up 86%;
• Power Systems up 12%;
• Services revenue up 10%, up 2% if adjusting for currency.

IBM’s guidance was raised for “operating earnings per share expectations to at least $13.25 EPS from at least $13.15 EPS” and we have a Thomson Reuters estimate of $13.22 EPS.

For the quarter, gross margin came in at 46.4% for the company overall.  The company spent some $3.976 billion buying back stock (versus $905 million for dividends).  IBM ended the quarter with $11.8 billion in cash on hand and its free cash flow grew by about $350 million from a year ago to $3.4 billion.

There is no awful news here, perhaps not even on the currency front.  Shares closed at $175.28 and the 52-week and all-time high is $177.77.  Much of the good news is priced in even if the stock is not exactly expensive at 13.2-times this year’s expected earnings.

Shares were indicated lower at first but now we have shares hitting just over the $178.00 level in after-hours trading. The question tha remains is whether or not investors can get past all of the negative news hitting the tape that has nothing at all to do with IBM.

JON C. OGG

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