Will International Business Machines, Corp. Earnings Reverse Their Recent Misfortunes by Estimize
International Business Machines, Corp. (IBM) Information Technology – IT Services | Reports January 19, After Market Closes
The Estimize community calls for EPS of $4.77 and revenue of $22.126 billion, surprisingly less than Wall Street’s revenue estimates
International Business Machines’s traditional segments have struggled due to a strong U.S. dollar, slower growth in emerging markets and a shift away from software
International Business Machines Large investments have been made to help create sustainable growth in social, mobile, analytics, and cloud platforms
Earnings season has started once again and the spotlight is aimed at many of the world’s largest companies. With two weeks passed in the new year, the stock market is off to its worst start and perhaps signaling how the rest of the year will look. Unfortunately, fourth quarter earnings is unlikely to be the catalyst coming to investors rescue. Amongst the underperformers, IBM is expected to continue its downward trend when they report Q4 earnings this Tuesday, January 19th. In 2015, share prices of IBM fell 16% as the IT company transitions away from traditional segments to high growth markets. IBM’s struggles come due to a strong U.S. dollar, slower growth in emerging markets, and a societal shift away from software to cloud computing. Nonetheless, IBM has made investments into developing cloud computing, Big Data, mobile and security to ensure long term profitability. In the near term however, a high debt burden and limited liquidity from restructuring will put a drag on IBM’s Q4 2015 earnings. The Estimize community calls for EPS of $4.77 and revenue of $22.126 billion, surprisingly less than Wall Street’s revenue estimates. Compared to Q4 2014, this represents a YoY decline in EPS and revenue of 17% and 7% respectively. Many of IBM’s strategic initiatives in the past year, whether they were acquisitions or new patents, have been aimed at enhancing their position in cloud computing, Big Data or Internet of Things (IoT). Considering the enormous growth in this space, IBM has taken an aggressive stance towards growing this segment, not only to create a competitive edge, but also provide a much needed stable source of revenue. Despite a rapidly growing technology sector, IBM will face intense competition as they grow out their new initiatives. IBM will find it difficult to carve out its niche in cloud computing as long as Amazon Web Services remains the preeminent cloud platform. Furthermore, the company’s strategic investments come at a substantial cost. A rising debt burden should have a major impact on the operational efficiency of the company as a major portion of the company’s earnings would be diverted towards servicing debt. IBM’s lackluster growth in the past few quarters is unfortunately expected to continue after Q4 2015 earnings are reported and through 2016.
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