Q1 Preview: Analysts Like Software, Enterprise Spending Trends into IBM's (IBM) Results

International Business Machines (NYSE: IBM) is higher Tuesday heading into its first-quarter earnings report, expected out after the market closes.

Currently, the Street is looking for earnings of $2.65 per share on revenue of $24.77 billion. Numbers compare with EPS of $2.41 and revs of $24.6 billion reported in the same period last year.

Shares gained 14 percent in the quarter to $208.65 at the end of March. Shares are 1.3 percent lower since then. IBM gained just over 27 percent in 2011.

Data from Bloomberg has 14 analysts at Buy, 14 at hold, and one with a Sell rating. The Street's price target average is $209, ranging from $192 to $235. IBM traded within a range of $157.13 to $210.69 over the last year.

Analyst Comments

• JPMorgan sees earnings of $2.60 per share and revs of $24.68 billion. The firm commented: "We do not expect Fx fluctuations to be as bad as previously feared. As for the business segments, we expect services and software to be better than expected while hardware could still be bumpy" Software growth should be about 6.9 percent in the quarter with gross margin of 87.1 percent. On Software, JPMorgan said, "We believe IBM has the right software assets in place and thereby there is less risk of a major software acquisition, which gives IBM the flexibility to deploy cash elsewhere."
  
  
• Goldman Sachs is looking for EPS of $2.63 and revs of $24.72 billion. Goldman is bullish on improving enterprise spending momentum in the March quarter and continued cost reductions in services. The firm also noted, "healthy enterprise activity and tame annual comparisons should enable constant currency services signings growth of 16% (with double-digit growth in short-term and long-term signings). Difficult mainframe comps and a sluggish x86 server market should still serve as revenue headwinds in 1H2012, but we believe this is more than factored into current investor expectations."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out IBM's past performance at Streetinsider's IBM''s Income Statement.

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