Technology

What to Watch For in IBM's Q4 Report After the Close

Chris Lange

Published: January 22, 2019 10:00 am

Last Updated: January 31, 2020 1:46 am

International Business Machines Corp. (NYSE: IBM) is set to release its most recent quarterly results after the markets close on Tuesday. Thomson Reuters has consensus estimates of $4.84 in earnings per share (EPS) and $21.75 billion in revenue. The same period of last year reportedly had $5.14 in EPS and $22.54 billion in revenue.

This is a company that just cannot get a break, even in acquiring Red Hat. As we have noted in prior years, IBM has continued to disappoint, as the decline in the core IT services business cannot be made up with the added boosts from stock buybacks and increased dividends. Its growth areas of cloud, artificial intelligence, machine learning and other high-growth segments haven’t made up for the difference yet.

IBM may still have a $111 billion market cap, but its poor stock performance in 2018 gave it the biggest dividend yield of all Dow Jones industrials at 5.1%. It is a dubious honor being the “Top Dog of the Dow” when you think about the huge pending acquisition of Red Hat, a CEO that needs to be fired and a company wherein the growth strategies and strategic imperatives just cannot offset the decline in its core IT-services. That may end one day, but IBM has been a disappointment for so long that no one at Big Blue can blame the recent market volatility for its woes. Just look at a multiyear chart of IBM as a standalone market bet — you would think there was no bull market before 2018.

So far in 2019, IBM has outperformed the broad markets, with its stock up about 9%. However, over the past 52 weeks the stock is actually down closer to 27%.

A few analysts weighed in on IBM ahead of the report:

• Cantor Fitzgerald has a Hold rating and a $140 price target.
• Stifel has a Buy rating with a $178 price target.
• RBC has an Outperform rating and a $167 price target.
• Wolfe Research has a Market Perform rating.
• BMO Capital Markets has a Hold rating with a $145 target.

Shares of Big Blue recently traded at $123.15, in a 52-week range of $105.94 to $168.72. The stock has a consensus analyst price target of $143.84.