Here’s Why International Business Machines Corp. Shares Are Falling Following 4Q Earnings Beat

After the bell, International Business Machines Corp. (NYSE:IBM) reported fourth-quarter earnings, showing positive revenue growth for the first time since 2012. Specifically, the tech giant delivered 4Q results that beat consensus expectations with total revenues and EPS of $22.54 billion and $5.18 coming in above expectations of $22.05 billion and $5.17, respectively.

So why did IBM shares pull back in after-hours trading? GBH Insights analyst Daniel Ives answers: “While the headline numbers were slightly ahead of expectations, the all important Strategic Imperatives segment (17% growth, 14% constant currency) was in line with the Street’s estimate, but the bulls were hoping for a clean beat on this key growth segment which represents the underpinnings of the IBM turnaround story in 2018. The Strategic Imperatives segment remains the main fuel in IBM’s diesel engine heading into 2018 as it represents roughly 50% of revenues and is growing double digits thus helping neutralize some of the massive headwinds on its traditional mainframe hardware business. The quarter/guidance overall we would characterize as a small step in the right direction for Rometty and IBM as the combination of healthy cash flow, strong growth on next generation software areas (big data, analytics, cloud, security), and “good enough” 2018 guidance as enough for the bulls to hang their hat on tomorrow morning.”

Ives reiterates a Buy rating on IBM shares, with a price target of $180, which implies an upside of 6% from current levels. (To watch Ives’ track record, click here)

TipRanks points to a Wall Street consensus split between the bulls and those not ready to take the leap quite yet. Based on 10 analysts polled in the last 3 months, 4 rate a Buy on IBM stock while 6 maintain a Hold. The 12-month average price target stands at $174.50, marking a slight upside of 3% from today’s closing price. 


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