International Business Machines Corp (NYSE: IBM)
IBM is having an incredibly rough day in the market today, and for good reason. The company reported earnings after the bell yesterday, and while those earnings seemed to be overwhelmingly positive, they outlined a key issue the company has been facing for quite some time. Today, we’ll talk about what we saw from earnings, how the market reacted to the news, and what we can expect to see from IBM moving forward.
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International Business Machines Reports Q1 Earnings
As mentioned above, IBM reported its earnings for the first quarter on Monday following the opening bell. At first glance, everything seemed great. Here’s what we saw:
- Earnings – In terms of earnings per share, IBM absolutely blew away expectations. While analysts expected that the company would report earnings in the amount of $2.09 per share, the company actually reported earnings $0.26 ahead of expectations at $2.35 per share.
- Revenue – Revenue also seemed overwhelmingly positive for the company. In the first quarter, it was expected that IBM would produce revenue in the amount of $18.28 billion. However, the company reported revenue $420 million ahead of expectations, raking in $18.7 billion.
- Where’s The Bad News – Although everything above may look great, it’s not all roses and dandelions. Unfortunately, the numbers above are overwhelmingly bad. While IBM did beat earnings and revenue expectations, there wasn’t much that was expected. In fact, yesterday’s report shows that International Business Machines has seen revenue decline for 16 consecutive quarters. That’s incredibly bad news.
Following the release of the report, Ginni Rometty, IBM Chairman, President and CEO, had the following statement to offer:
“We are pleased with the progress we have made helping our clients apply new cognitive solutions and hybrid cloud platforms… IBM has established itself as the industry leader in total cloud, analytics, and cognitive, all of which helped drive our strategic imperatives revenue growth at a strong double-digit rate, substantially faster than the market.”
How The Market Is Reacting To The News
As investors, we know that the news moves the market. While the earnings report looked positive at first glance, when we dig into the details, we see just how negative the report actually was. So naturally, IBM is having a negative reaction in the market as a result. Currently (8:58), the stock is trading at $146.58 per share after a loss of $5.95 per share or 3.90% thus far today.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively mixed opinion of what we can expect to see from IBM. In the short term, I have an overwhelmingly bearish opinion of what we can expect to see from the stock. After all, poor earnings will drive any stock down, and the problems the company is facing with overall revenue need to be solved. On the other hand, IBM is a great company with great products. The company is currently going through what I consider to be a tidal shift with regard to its product offerings, and chances are that this is weighing on revenue in one way or another. Once the shift is complete, I believe that IBM will be doing incredibly well. So, in the long run, I maintain a relatively bullish opinion on the stock.
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What Do You Think?
Where do you think IBM is headed moving forward and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikimedia]