International Business Machines Corp.’s (IBM) 3Q:17 Earnings At First Glance


International Business Machines Corp. (NYSE:IBM) are climbing nearly 5% in after-hours trading Tuesday, after the tech giant blew away expectations for its third-quarter earnings.

Specifically, IBM reported third-quarter sales of $19.15 billion that handily beat consensus estimate of $18.63 billion. Pro forma EPS of $3.30 exceeded the Street’s estimate of $3.28.

During the third-quarter, IBM grew its strategic imperatives revenue by 10% to $8.8 billion with cloud revenue growing by 20% to $4.1 billion and analytics increasing by 5% to $5.0 billion. Within cloud, IBM’s as-a-Service annual revenue run rate reached $9.4 billion in the third-quarter and up by 24% YoY.

Looking ahead, IBM reiterated its 2017 operating EPS outlook of at least $13.80 and free cash flow to be flat. The Street is projecting 2017 EPS of $13.75. For 4Q:17, the Street is projecting revenue of $21.82 billion and EPS of $5.14.

IBM CEO Ginni Rometty commented, “In the third quarter we achieved double-digit growth in our strategic imperatives, extended our enterprise cloud leadership, and expanded our cognitive solutions business […] There was enthusiastic adoption of IBM’s new z Systems mainframe, which delivers breakthrough security capabilities to our clients.”

IBM CFO Martin Schroeter added, “During the first three quarters of the year, our strong free cash flow has enabled us to maintain our R&D investments and to expand IBM’s cloud and cognitive capabilities through capital investments […] In addition, we have returned nearly $8 billion to shareholders through dividends and share repurchases.”

On the ratings front, IBM stock has been the subject of a number of recent research reports. In a report issued on October 13, Cantor analyst Joseph Foresi maintained a Hold rating on IBM, with a price target of $154, which represents a potential upside of 5% from where the stock is currently trading. Similary, on October 12, RBC’s Amit Daryanani reiterated a Hold rating on the stock and has a price target of $160.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Joseph Foresi and Amit Daryanani have a yearly average return of 16% and 28.7% respectively. Foresi has a success rate of 88% and is ranked #43 out of 4697 analysts, while Daryanani has a success rate of 91% and is ranked #5.

Sentiment on the street is mostly neutral on IBM stock. Out of 16 analysts who cover the stock, 8 suggest a Hold rating , 6 suggest a Buy and 2 recommend to Sell the stock. The 12-month average price target assigned to the stock is $167.73, which represents a potential upside of 14% from where the stock is currently trading.