Warren Buffett predicts that International Business Machines Corp. (NYSE:IBM) will have record earnings per share this year. He made that comment last night on PBS’ Charlie Rose show, report Sarah Rier and Noah Buhayar of Bloomberg.
IBM reports falling sales
Buffett said even though the company will report record earnings, some investors might be disappointed if they expected more. However, he called his expectation “not a bad record” for IBM.
Last week International Business Machines Corp. (NYSE:IBM) reported falling sales for the sixth quarter in a row. That sent its stock into a downward spiral, landing at its lowest price in over two years. Out of all of the top investments at Warren Buffett’s Berkshire Hathaway Inc (NYSE:BRK.A) (NYSE:BRK.B), IBM is the worst performing.
Buffett peers into IBM’s future
According to Bloomberg, Buffett, often referred to as the “Oracle of Omaha,” started building his firm’s stake in IBM in the early part of 2011. This came after shares rose 74 percent in the two years from the end of 2008 to the end of 2010. As of the end of the second quarter, Berkshire held 68.1 million shares of IBM.
Warren Buffett said he doesn’t look at any company’s results from just a single quarter. He also emphasized that every company has struggles, including his own firm. He said Berkshire has had “a fair number of blips over time.”
IBM’s revenue falls, but earnings rise
Even though International Business Machines Corp. (NYSE:IBM)’s revenue has been falling, its earnings have kept climbing. Last week the technology company reiterated its guidance for $20 per share in earnings in 2015. That’s an increase from $11.52 per share in 2010. Since then, the company has sold some of its businesses which were less profitable and bought some software companies with high margins. It has also reduced its tax rate and bought back some of its shares in its efforts to increase earnings per share.
Berkshire Hathaway Inc (NYSE:BRK.A) (NYSE:BRK.B)’s stock portfolio has been built around Buffett’s investments into companies he thinks will have a long-lasting competitive advantage over others. The firm also keeps its money in the same companies for several years. Most of Buffett’s picks have paid off, some in a big way. His biggest holding Wells Fargo & Co. (NYSE:WFC), for example, has increased 26% so far this year.