RBC Capital Cuts Price Target on IBM (IBM) Following 4Q EPS Beat
RBC Capital maintained a Sector Perform rating on IBM (NYSE: IBM), and cut the price target to $135.00 (from $145.00), following the company's 4Q warnings report. IBM reported revenue of $22.1B which was in-line with Street expectations, while operating EPS of $4.84 was ahead of Street estimates of $4.81.
Analyst Amit Daryanani commented, "We maintain our neutral stance on IBM as CY16 EPS guidance of $13.50 and FCF were initiated well below consensus (though ex hedges EPS guide is down low single digits y/y and could have risk if demand gets worse). While the currency impact for IBM should improve y/y in CY16, based on spot rates, IBM indicated that $1.00+ of the y/y CY16 EPS decline is attributed to the roll-off of FX hedges recognized in 2015. Although strategic imperatives grew 26% in Dec-qtr (now 35% of revenue), we note the software trajectory worsened in Q4 and the company provided no indication the trajectory will improve in CY16. Based on tepid EPS/FCF guide and continued software declines, and System-Z entering the end of the mainframe cycle, we continue to stand on the sidelines. Maintain SP rating and lowering target to $135."
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Shares of IBM closed at $128.11 yesterday.