Q4 Shows IBM (IBM) Transition Continues - Jefferies

Jefferies analyst, James Kisner, reiterated his Underperform rating and $110 PT on IBM (NYSE: IBM) following Q4 results. Weakness in software and services bookings continue to plague the company.

Adjusting for taxes, Q4 EPS missed consensus. CY16 EPS and FCF guidance was disappointing driven by currency and ongoing weakness in Software. The analyst believes IBM faces a tough transition as enterprises increasingly allocate investments away from traditional Software and IT Services and toward as-a-service/cloud.

Q4 revenue hit $22.1B, inline with consensus of $22.1B. Q4 EPS of $4.84 modestly beat the Street's $4.81; however, ex-taxes Q4 EPS would have been $4.54.

Software was light at $6.77B (Street = $6.95B) and declined 6% Y.Y in constant currency. GTS revenue softness was offset by strength in GBS revenue. Services Signings was notably weak at $16.7B; -1% Y/Y and well below consensus of $19.1B.

2016 EPS guidance of $13.50 fell below consensus of $15.01. Currency is expected to be a 200-300bp headwind and a greater than $1 impact to EPS. 2016 FCF guidance of $11-$12B and Q1 EPS guidance of $2.03 (Street = $2.92) were also disappointing.

For an analyst ratings summary and ratings history on IBM click here. For more ratings news on IBM click here.

Shares of IBM closed at $128.11 yesterday.

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