IBM Reports Thursday: Can It Deliver Sales Surprise?


IBM is a favorite among conservative investors for several reasons.

Some investors point to a dividend that has increased 17 years in a row, and a payout that has more than doubled since early 2008. Others note the company's increased and successful focus on margins.

The focus on margins has involved saying no to some business.

In the past decade, IBM has divested units that accounted for about $15 billion in annual revenue. As the firm pointed out in its 2012 annual report, "If we had not done so, we would be a larger company today, but with lower margins."

When the company reports Q1 results after Thursday's close, the Street expects earnings to come in at $3.05 a share, a 10% increase vs. the year-ago period.

If IBM hits the EPS mark, the 10% increase will be the 16th consecutive quarter of double-digit earnings growth.

Revenue is the key item. The Street sees IBM's revenue inching up 0.1% -- virtually nothing -- to $24.69 billion. That would be an improvement over the previous three quarters, which showed declines of 3%, 5% and 1%. However, a substantial beat on revenue -- the high estimate is a 3% pop to $25.42 billon -- could be a bear-buster.

Three factors are behind the sluggish sales. The world economy is providing stiff head winds. The currency factor has trimmed sales, pulling 2012 revenue down 2% (vs. flat in constant currency). And the company continues to divest units. Last year, the Retail Stores Systems was sold to Toshiba.

IBM has shaped a series of bases in the last year or so. None has led to big moves. The stock currently is working on the fifth week of a flat base. The potential entry is 216.

Considering the head winds in the stock market, this probably is a time to be cautious.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

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