IBM Corp. plans to report its second-quarter results on Wednesday, with the uncertain global economy serving as a challenging backdrop to this usually stable technology bellwether.
WHAT TO WATCH FOR: IBM’s earnings often beat Wall Street’s expectations, but revenue growth tends to be a focus for investors. Last quarter, the company fell shy of revenue estimates — while software and services revenue increased, its hardware and financing segments saw a decline. IBM has been focusing on its software and services offerings lately, which have higher profit margins.
Credit Suisse analyst Kulbinder Garcha said that the unsteady economy and increasingly challenging comparisons with last year likely to constrained revenue growth for the quarter. That said, IBM’s shift to offering that provide a higher profit margin, along with moves like cost cuts aimed at making operations more efficient, “are likely to support IBM’s earnings march.”
But the corporate spending environment is “uneven” even though there are some pockets of strength, he added. He rates IBM “Neutral” and has a target price of $200 on its stock.
WHY IT MATTERS: IBM is the world’s largest technology-services company. Its results provide a gauge of businesses’ appetite for technology spending.
WHAT’S EXPECTED: Analysts, on average, are expecting earnings of $3.43 per share on revenue of $26.34 billion, according to a poll by FactSet.
LAST YEAR’S QUARTER: IBM earned $3.66 billion, or $3 per share. Excluding items, it earned $3.09 per share, ahead of the $3.02 per share analysts expected. Revenue grew 12 percent to $26.7 billion, also surpassing expectations.
