- IBM (NYSE:IBM) is scheduled to announce Q4 earnings results on Monday, January 24th, after market close.
- The consensus EPS Estimate is $3.29 (+58.9% Y/Y) and the consensus Revenue Estimate is $15.98B (-21.6% Y/Y).
- Over the last 2 years, IBM has beaten EPS estimates 100% of the time and has beaten revenue estimates 63% of the time.
- Over the last 3 months, EPS estimates have seen 0 upward revisions and 10 downward. Revenue estimates have seen 0 upward revisions and 7 downward.
- Shares fell -9.56 on Oct 21, a day after IBM reported its Q3 financial results. The technology services company earned $2.52 a share on revenue of $17.62B, which missed analyst estimates by $190M. The disappointing sales results was mainly linked to IBM's global technology services business, which saw its sales drop 5% from a year ago to $6.15, as orders continued to drop.
- The management had at the time guided for a double digit revenue growth in IBM Consulting division for the fourth quarter and Software revenue growth rate to improve versus the third quarter. In Infrastructure, IBM anticipates a fairly consistent performance with the Q3, which was a high single-digit decline.
- Overall, the firm expects to end the fourth quarter in a position to deliver its midterm model (a mid-single-digit revenue growth and cumulative free cash flow of $35B in 2022 to 2024).
- IBM was active on the M&A front during the quarter, acquiring: Rego Consulting's Adobe Workfront business to enhance its Adobe service offering; Australian digital transformation services company 'SXiQ' to enhance consulting capabilities in Australia and New Zealand; and data analytics software provider Envizi. The tech giant has been investing heavily to strengthen its hybrid cloud and AI strategy and capabilities, with a focus on acquiring high-value consultative services.
- IBM most recently announced plans to sell off its healthcare data and analytics assets to Francisco Partners that are currently part of the Watson Health business. It also officially completed the spinoff of its managed technology services business, Kyndryl (NYSE:KD) after a year of preparation.
- These developments show that the company is narrowing its focus on a "portfolio that allows us to grow", CEO Arvind Krishna said following the Kyndryl spinoff. Krishna told CNBC that IBM now has a portfolio focused on growth centers like Red Hat, automation, security and consulting.
- However, UBS downgraded IBM to sell after the Kyndryl spin-off, citing an "elevated valuation that leaves the shares vulnerable over the next 12 months." Recent SA contributor analyses have also been largely bearish. One analysis suggests that IBM's bottom line results will be hit by one-off expenses such as spin-off, restructuring and other excess cost items.
- Stock's performance against its peers over the last one year:
Will Kyndryl spinoff weaken IBM's Q4 earnings?
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