After the closing bell on Jan 24, International Business Machines IBM reported solid fourth-quarter 2023 results. IBM shares gained as much as 9.5% in the key trading session on Jan 25, 2024. The company ended 2023 on a positive note with strong fourth-quarter results, wherein both the top and bottom lines beat the respective Zacks Consensus Estimate. The company witnessed healthy demand for hybrid cloud and AI solutions with a client-focused portfolio and broad-based growth.
For full-year 2024, the Zacks Rank #2 (Buy) company expects revenue growth in the mid-single digit on a constant currency basis. Free cash flow is expected to be in the vicinity of $12 billion. The stock hails from a top-ranked Zacks Sector (top 31%) and top-ranked Zacks industry (top 45%). The stock has a dividend yield of 3.82% annually.
This has put focus on IBM-heavy ETFs like FT Vest DJIA Dogs 10 Target Income ETF DOGG, First Trust NASDAQ Technology Dividend Index Fund TDIV, FT Vest Technology Dividend Target Income ETF TDVI, Invesco Dow Jones Industrial Average Dividend ETF DJD and First Trust Morningstar Dividend Leaders Index Fund FDL. These ETFs have exposure to IBM in the range of 10.6% to 5%.
Net Income
On a GAAP basis, net income from continuing operations was $3,285 million or $3.54 per share compared with $2,711 million or $3.13 per share in the year-ago quarter. The improvement in GAAP earnings was primarily attributable to top-line growth.
Excluding non-recurring items, non-GAAP net income from continuing operations was $3.87 per share compared with $3.60 in the prior-year quarter. The bottom line beat the Zacks Consensus Estimate by 9 cents.
For 2023, GAAP net income from continuing operations was $7,514 million or $8.15 per share compared with $1,783 million or $1.95 per share in 2022. Non-GAAP net income from continuing operations was $9.62 per share compared with $9.13 in 2022.
Quarter Details
Quarterly total revenues increased to $17,381 million from $16,690 million on strong demand for hybrid cloud and AI, driving growth in the Software and Consulting segments. On a constant currency basis, revenues were up 3% year over year. The top line beat the consensus estimate of $17,279 million.
Gross profit was $10,267 million compared with $9,632 million in the prior-year quarter, resulting in respective gross margins of 59.1% and 57.7% owing to a strong portfolio mix. Total expenses increased to $6,509 million from $6,320 million, driven by higher interest expense and R&D costs.
IBM said software revenue came to $7.51 billion, up 3% but less than the $7.67 billion consensus among analysts surveyed by StreetAccount, as quoted on CNBC. Consulting revenue, at $5.05 billion, jumped about 6% but fell shy of the $5.12 bllion StreetAccount consensus.
Revenue from infrastructure, such as mainframe computers, totaled $4.60 billion, up around 3%. Thus beat the StreetAccount consensus of $4.28 billion. The distributed infrastructure category in particular, containing servers with IBM’s Power chips, accelerated to 8% growth, compared to a decline of 4% in the third quarter.
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