IBM (IBM) Reports 3c EPS Beat; RBC Capital Cuts Price Target to $150
RBC Capital maintained a Sector Perform rating on IBM (NYSE: IBM), and cut the price target to $150.00 (from $155.00), following the company's 3Q15 earnings report. Revenue of $19.3B was below expectations, with the Street at $19.6B. Operating EPS of $3.34 was ahead of Street estimates of $3.31.
Analyst Amit Daryanani commented, "IBM reported Sep-qtr results from continuing operations that were above expectations on EPS but below the Street on revenues: $19.3B/$3.34 (vs. Street at $19.6B/$3.31). More importantly, IBM lowered its CY15 EPS guide to $14.75–15.75 (from $15.75–16.50) and lowered its FCF expectation to be flat y/y (vs. prior expectation for a modest increase). While strategic imperatives growth of +27% was a positive, we note that the software trajectory failed to improve and that the GBS transition to higher value is taking longer than originally anticipated. Within hardware, System-Z and Power continue to report growth while storage declined -14% y/y due to soft disk-based storage revenue. Based on the current trajectory of software, the slower than expected GBS transition, and Hardware nearing the tail end of the SystemZ cycle, we estimate another y/y revenue decline for 2016. Maintaining Sector Perform and lowering price target to $150 from $155."
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Shares of IBM closed at $149.22 yesterday.