Close

IBM (IBM) Higher Into Q1 Print Despite Highly-Likely Top-Line 'Miss'

April 20, 2015 3:35 PM EDT
Get Alerts IBM Hot Sheet
Price: $190.80 --0%

Rating Summary:
    12 Buy, 23 Hold, 4 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 9 | Down: 7 | New: 10
Join SI Premium – FREE

IBM (NYSE: IBM) is up 3.5% into earnings after the close of trading today. Analysts on average are looking for EPS of $2.82 on revenues of $19.73 billion, representing year-over-year growth of 11% and (12%), respectively.

The company has flipped-flopped between beats and misses the past few quarters on EPS but has consistently missed on the revenue side. Bernstein analyst Toni Sacconaghi expects much of the same this quarter. He is calling for a revenue miss in Q1 (due primarily to currency), but in line EPS and that the company will reaffirm its FY15 EPS guidance.

Sacconaghi said the "reported revenue figure will be ugly (-13% by our estimates), but 8% of the decline is due to currency and nearly 4% is due to divestitures."

They believe that IBM will reaffirm FY15 EPS guidance of $15.75 to $16.50, and they forecast EPS of $16.18 vs. consensus at $15.94.

Sacconaghi also said the consensus revenues appear way too high for Q115 – likely by more than $3B, about $2B of which we attribute to the recent move in currency. For FY15, they forecast revenue of $81.9B vs. consensus at $85.3B, and note that consensus appears to imply organic revenue growth of 3.4% for FY15 based on current spot rates, which they believe is very unlikely.

They said Q1 cash flow will be weaker than normal – most likely below $1B (vs. net income of $2.8B), but they believe IBM will likely reaffirm its FCF guidance.

While shares are stronger going into the print, Sacconaghi warns, "IBM’s stock historically has been driven by revenue growth, and increasingly investors have been focused on cash flow. With revenue forecasts likely to decline and Q1 cash flow likely to be weak, we see no near term catalysts for the stock."



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Analyst Comments, Earnings, Trader Talk

Related Entities

Earnings, Toni Sacconaghi