International Business Machines Corp. (NYSE: IBM) acted as a big drag lower on the Dow Jones Industrial Average on Tuesday after its second-quarter earnings report. This was another disappointing quarter for investors. While IBM has serious currency and foreign exchange issues, it looks like most aspects of the report had soft figures.

Big Blue reported $3.84 in earnings per share (EPS) on $20.8 billion in revenue, versus Thomson Reuters consensus estimates of $3.78 in EPS on $20.95 billion in revenue, and also versus EPS of $4.43 and revenue of $24.36 billion a year earlier. IBM did maintain that earnings would be in the range of $15.75 to $16.50 per share in 2015, with a modest increase in free cash flow.

24/7 Wall St. wanted to go beyond earnings here. The reality is that analysts have a big war going on in their formal research coverage on IBM. You can still find IBM bulls, and there are enough bears to go around as well.

IBM’s services backlog was $122 billion, up over 1% adjusting for currency; and free cash flow was up $800 million to $4.5 billion. The company sent back $4.7 billion in capital to shareholders, with dividends of $2.4 billion and gross share repurchases of $2.3 billion.

24/7 Wall St. wanted to review some of the key analyst calls which have been made after IBM’s second-quarter earnings report. We included the most bullish call (from Cantor Fitzgerald) and the most bearish call (from Credit Suisse) first to get the polarizing calls out of the way.

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Big Blue’s Biggest Bull

Cantor Fitzgerald was more bullish than most firms out there. In fact, the Buy rating and the $198 price target here are actually the most optimistic of all firms. Analyst Brian White sees IBM’s performance as healthy, when considering prior quarterly reports.

White did note that IBM’s reiterated 2015 earnings outlook came with a back-end loaded bias. He also noted that IBM had risen nearly 7% from the intra-day low of two weeks ago and has a history of falling after earnings reports of late. White further said:

Given skepticism around this turnaround and continued negative sentiment around IBM, the stock is trading at just 10.6 times our 2016 EPS estimate with an attractive 3% dividend yield and our model continues to suggest IBM’s sales cycle bottomed out in the second quarter of 2015 (and operating profit cycle bottomed in the fourth quarter of 2014).

Cantor’s report lowered revenue estimate to $83.0 billion from $83.9 billion, and it adjusted the forecast to $15.75 from $15.88 in EPS.

Big Blue’s Biggest Bear

Credit Suisse’s Kulbinder Garcha maintained IBM’s rating as Underperform with a $125 price target. This remains the lowest analyst price target on Wall Street. After IBM missed earnings expectations again, the firm further lowered its earnings estimates.

Garcha noted that IBM posted another mixed quarter, in which EPS beat expectations at a time that revenues were light against expectations. The EPS was helped by a lower tax rate, and of course IBM did spend close to $2.3 billion buying back common stock in the quarter to help its financial engineering. Garcha said:

We believe the secular and structural challenges facing IBM remain and specifically we see limited improvement in services margins or software growth. On balance, guidance could again be challenging to achieve operationally. We adjust our EPS estimates slightly for 2015 and 2016 to $15.58 EPS and $14.66 EPS, and see a multi-year painful turnaround ahead.

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Merrill Lynch

Bank of America Merrill Lynch’s Wamsi Mohan maintained a Neutral rating and $170 price objective. This call pointed out that IBM’s investments for the long term are creating near-term headwinds. Mohan’s report said:

Slightly below Street 2Q revenue, and lower Services margin hurt IBM operating results. But EPS beat on below line items. IBM maintained 2015 guide, but below Street 3Q creates dependence on 4Q results. We model below guide on FX and weak software. During the quarter, GTS was up 1% Y/Y in CC, GBS declined 3% Y/Y, Hardware increased 5% while Software declined 3% Y/Y.

The Merrill Lynch investment thesis indicated that IBM is actually a defensive investment given its high exposure to recurring sales, cost cutting levers, a solid balance sheet, potential share gains and relatively stable margins. Mohan also believes that IBM will pursue further cost cuts, as well as enhance its services and software offerings through acquisitions. And on the longer-term view, Merrill Lynch sees IBM as a share winner in the IT spending market — but the firm remains cautious near term on reset of estimates for foreign exchange and divestitures.

Wells Fargo

Wells Fargo’s Maynard Um maintained a Market Perform rating with a valuation range of $165.00 to $175.00. The report noted that the quarter highlighted some areas of improvement in backlog and signings, slight growth in free cash flow from a year ago and strategic imperatives strength. Still, the legacy business continues to weigh on IBM. Um also noted that the tipping point, where IBM’s strategic initiatives growth drives greater profits than the declines in the legacy profits, just has not occurred. Um said:

Additionally, the company’s investments into the strategic initiatives, while the right strategic move for the long-term health of the business, are expected, nearterm, to continue to limit material margin expansion. While the headline EPS of $3.84 was better than our $3.75/Street’s $3.79, we note that the upside, relative to our forecast, was driven by the lower tax rate, which benefited EPS by $0.13. The business appears to generally be tracking more toward the lower end of the EPS guidance range due to currency and continued software softness and we lower our FY15 EPS to $15.82 from $16.15 to reflect this (FY16 reduced to $16.63 from $16.83).

We believe it is still too early in the transition and would wait for some consistency or better conviction in the bottoming of its legacy businesses before recommending shares, all else being equal. At 12.1x our 2015 FCF/share estimate, shares look fairly valued and we maintain our Market Perform rating.

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Wells Fargo’s $165 to $175 valuation range is based on about 10 times the firm’s 2015 EPS of $15.82 plus dividends. Um sees upside potential if IBM manages to generate higher EPS growth. He also believes that the negative risks include a potential impact from a weaker economy and execution risks.

S&P Capital IQ

IBM was reiterated as Hold at S&P Capital IQ. The firm did lower its 12-month price target to $178 from $188 in the call. While revenues were shown to be down 13% by S&P, they were nearly flat after adjusting for a divestiture and foreign exchange. S&P’s Scott Kessler said:

The S&P 1500 IT sector recently traded at a P/E of 16X and P/E-to-growth (PEG) ratio of 1.3. We apply those multiples and weight the outputs more heavily towards P/E, with IBM’s lacking growth, to arrive at our target, implying a P/E of 11X. We trim our EPS forecasts, given growth issues and a strong dollar, for 2015 to $15.70 from $15.81 and 2016 to $16.08 from $16.30.

Additional Earnings Data

IBM’s Global Technology Services revenues were down 10.5% to $8.07 billion, with a gross profit margin of 36.6%. Global Business Services revenues were down 12% to $4.35 billion, with a gross profit margin of 27.4%. Software revenues were down 10.1% to $5.83 billion, with a gross profit margin of 87.8%. Systems Hardware revenues were down 31.7% to $2.06 billion, with a gross profit margin of 48.2%. IBM’s financing revenues were down 5.2% to $478 million, with a gross profit margin of 44.7%.

IBM is growing its cloud and analytics business, but those just seemingly cannot grow fast enough to make up for the rest of the dragging issues. For cloud delivered as a service, IBM’s annual run rate of $4.5 billion, compared to $2.8 billion in the second quarter of 2014. Also, business analytics revenue was up more than 20%, adjusting for currency (up over 10% as reported).

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This is where you can see how foreign exchange and past businesses comes into play. Revenue from continuing operations of $20.8 billion was down by 1% year over year, adjusting for currency and the divested System x business (nine points and four points, respectively). Still, this was down 13% as reported.

IBM shares were down 5.6% at $163.45 in mid-afternoon trading on Tuesday. Its 52-week range is $149.52 to $196.40, and the consensus price target is roughly $160.50.

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