International Business Machines Corp., commonly known as IBM (NYSE: IBM), is an Armonk, New York based multinational technology and consulting company. On Monday, October 20th IBM released an abysmal Q3 report as CFO Martin Schroeter consequently revealed that IBM plans to abandon its long-term profit goal of delivering $20 operating earnings per share in 2015.
In Its Q3 results, IBM reported $3.68 earnings per share on a non-GAAP basis, falling short of analysts’ expectations of $4.32 by $0.64. During the same quarter of last year, IBM posted $3.99 earnings per share on a non-GAAP basis, representing a 10% year-over-year decrease. The company earned revenue from continuing operations of $22.4 billion, compared to the analysts’ consensus estimate of $23.38 billion. IBM’s quarterly revenue decreased 4% on a year-over-year basis.
In regards to another poor quarterly report, IBM CEO Ginni Rometty admitted “We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry.” However, Rometty remained optimistic noting, “While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas – cloud, data and analytics, security, social and mobile – where we continue to shift our business.”
Shares of IBM opened at $166.93 on Monday, October 20th. The company has a 1-year high of $199.21 and a 1-year low of $166.69. The stocks daily moving average is $168.52 and has a 50-day moving average of $190.77. The market cap for IBM is $168.69 billion and its P/E ratio is $10.67.
On October 20th Dan Burrows, a blogger for InvestorPlace, named IBM as a stock to Sell. In addition to referring to the meager Q3 report, he cited concern over IBM’s recent move to “pay $1.5 billion to get another company to take its semiconductor operations off its hands. That follows warnings from chipmaker Microchip Technology (MCHP) that the semiconductor industry has hit one of its periodic plateaus.” Due to the “economically sensitive” nature of the tech sector, a weak report from IBM is enough to “spook the market.” Burrows concludes, “By price-to-earnings measures, IBM looks like a bargain, but that doesn’t make it a buy. Sometimes stocks are cheap for a reason, and IBM looks to remain depressed until it makes tremendous progress in reversing its slumping top line.” Burrows currently has a 61% success rate recommending stocks and a +5.1% average return per recommendation.
On the other hand, analyst Scott Kessler of S&P Capital was not as quick to criticize IBM as Burrows, noting “It is not that they are making a lot of bad choices, it is just that they are so big and so far along one path, that even if they make some good decisions in terms of investments and acquisitions, it seems like it is too little too late in many contexts.”
On October 20th Scott Kessler recommended to Hold the stock, reasoning that “IBM posts operating EPS from continuing operations of $3.68 vs. $4.08, well below the Capital IQ consensus of $4.38.” He also cited the decline in total revenue and IBM’s announcement of “the pending sale of its microelectronics OEM semiconductor business and manufacturing operations to chip foundry company GlobalFoundries.”Kessler currently has a 69% percent success rate recommending stocks with a +16.8% average return per recommendation.
On average, the top analyst consensus for IBM is Hold.