International Business Machines Corp.
) is scheduled to announce its fiscal 2012 second quarter results
after the closing bell on July 18, 2012. In the run up to the
earnings release we noticed some analysts revising their estimates
downward. However, we note that IBM has outperformed the Zacks
Consensus Estimate in the preceding four quarters by a positive
3.04%. We expect this trend to continue in the current quarter.
Previous Quarter Highlights
IBM's bottom line of $2.78 in the first quarter of 2012 beat the
Zacks Consensus Estimate by 15 cents and increased 15.4% on a
year-over-year basis driven by strong margin expansions and share
repurchase activity. The top line remained flat year over year at
$24.67 billion and it marginally failed to beat the Zacks Consensus
Estimate of $24.74 billion. The top line was negatively impacted by
lower sales in the hardware segment, which was offset by strong
For further details, please read:
IBM Beats on Strong Margins
Estimate Revision Trend
In the last 30 days, out of the three analysts covering the
stock, two analysts revised their estimates downward and only one
upward revision was noticed. Thus, the Zacks Consensus Estimate for
the second quarter 2012 dropped by a penny in the aforementioned
period to $3.42. For the second quarter, the revenue estimate
as per Zacks Consensus is $26.33 billion.
Despite the ongoing macro-economic concerns, analysts expect IBM
to report a decent quarter on the back of robust signings and
higher recurring revenues. Moreover, the backlog payment is
expected to positively impact the quarterly results. However,
weaker-than-expected hardware sales coupled with high exposure in
Europe and unfavorable foreign exchange rates are the possible
headwinds for the company.
We believe the software segment of IBM to offset the sluggish
growth in the services segment and decline in hardware segment.
However, we remain cautious on the overall IT spending environment.
Moreover, unfavorable foreign currency, sluggish macro-economic
environment and stiff year-over-year comparisons in the hardware
segment are the near-term headwinds. Additionally, stiff
) are the other headwinds going forward.
We believe that IBM remains well positioned for long-term growth
based on its four key growth initiatives: smarter planet, growth
markets, business analytics and cloud computing. We believe that
IBM's strong product pipeline, expansion into emerging markets and
continuous acquisitions will help the company to achieve this
target going forward.
We have a long-term (6-12 months) Neutral recommendation on IBM.
Currently, IBM has Zacks #3 Rank, which translates into a
short-term Hold rating.
ACCENTURE PLC (ACN): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
MICROSOFT CORP (MSFT): Free Stock Analysis
ORACLE CORP (ORCL): Free Stock Analysis Report
To read this article on Zacks.com click here.