IBM earnings: Outlook for 2020 amid soft software market is key

Soft spending on enterprise software could set up a big challenge for International Business Machines Inc. in 2020, so how Big Blue spins its forecast for the year will carry a lot of weight when the company reports earnings.

IBM IBM, +0.59%  is scheduled to report fourth-quarter earnings after the market close Tuesday.

Recently, Evercore ISI analyst Amit Daryanani gave IBM a “no drama downgrade” to in-line from outperform and lowered his price target to $145 from $160 because he sees the company having a tough first half of 2020 along with fewer share repurchases because of debt.

With the bulk of the company’s fortunes riding on business software, Daryanani noted that the space itself is undergoing a tough business environment citing recent comments from companies like Cisco Systems Inc. CSCO, +0.46%, Dell Technologies Inc. DELL, -0.51%, Hewlett Packard Enterprise Co. HPE, -0.32%  , and NetApp Inc. NTAP, +0.64%  

Earnings: Of the 18 analysts surveyed by FactSet, IBM on average is expected to post adjusted earnings of $4.69 a share, down from the $4.70 a share expected at the beginning of the quarter. Estimize, a software platform that uses crowdsourcing from hedge-fund executives, brokerages, buy-side analysts and others, calls for earnings of $4.71 a share.

Revenue: Wall Street expects revenue of $21.64 billion from IBM, according to 15 analysts polled by FactSet. That’s down from the $22.07 billion forecast at the beginning of the quarter and the $21.76 billion reported in the year-ago quarter. Estimize expects revenue of $21.69 billion.

Analysts surveyed by FactSet expect global technology services revenue of $7 billion from IBM. Analysts also expect cloud and cognitive software revenue of $7.14 billion from IBM, along with global business services revenue of $4.27 billion, and systems revenue of $2.83 billion.

Stock movement: IBM shares are down 3.5%

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