By Brendan Gilmartin, VP Research & Content
IBM Corp. (IBM) is slated to report 1Q 2013 earnings after the close of trading on Tuesday, April 16. Results are typically released at approximately 4:05 p.m. EST and will be followed with a conference call at 4:30 p.m. IBM is a member of the Dow Jones Industrial Average, with broad market influence, and could have direct impact on the index futures when it delivers quarterly results.
Outliers And Strategy
Adjusted/Non-GAAP EPS is forecast to come in at $3.05 per share (Source: Yahoo Finance) with a range of $2.86-$3.10, up from $2.78 in the prior year.
Other Key Measures:
- Revenues: The estimate is $24.69 bln (range is: $24.16 bln to $25.42 bln). On a handful of recent occasions, IBM has missed on the top-line, triggering noticeable sell-offs in the after-market.
- Gross Margin: This is a key measure for IBM. The current estimate is 46.5%.
- Adjusted Earnings Per Share (EPS) Guidance (FY): Back in January, IBM said its outlook for 2013 operating (non-GAAP) diluted earnings per share was for "at least" $16.70. The Street is looking for an upward adjustment to this forecast, with consensus estimates running between $16.77 and $16.80.
- Keep an eye on Accenture (ACN) as a potential sympathy play off the IBM numbers.
- IBM could see meaningful volatility off the 1Q 2013 earnings release, with the options market currently pricing in a 3.3% move following the release. A move to the upside of that magnitude would leave IBM at a fresh all-time high.
04/10: UBS (UBS) upgraded IBM from Neutral to Buy and raised the price target from $210 for $235, based in part on its position in cloud-computing, according to a post on StreetInsider.com. The firm also believes IBM is well on its way toward earning up to $15 per share in 2015, based on strength in hosting and support and cloud expansion.
01/29: IBM declared a regular quarterly cash dividend of $0.85 per common share. The shares are yielding a mere 1.60%.
IBM shares recently broke out to an all-time high near $215, benefiting from strength in the cloud and services segment. To sustain the momentum, IBM needs to deliver earnings near the high end of estimates in order to justify the advance. Such a scenario could easily lift shares back above $215. Conversely, an in-line to weak quarter could leave the Street disappointed, and potentially trigger a pullback toward the 50-Day SMA near $207, with further downside risk to $202.50. Note that the average price change off earnings is 3.5% in the day following the report. (Chart courtesy of StockCharts.com)
IBM shares are near an all-time high ahead of the 1Q 2013 earnings release. On one hand, IBM is benefiting from trends that include data analytics, cloud computing, share repurchases, and a favorable valuation. Coming into Tuesday's earnings, much of the focus will center on the growth in services and cloud-computing. If IBM can deliver earnings and revenues at or above the current Street projections, along with a more robust outlook for the balance of 2013, the shares could advance back toward the recent high near $215. A weak outlook could have the opposite effect.
Disclaimer: By using this report, you acknowledge that Selerity, Inc. is in no way liable for losses or gains arising out of commentary, analysis, and or data in this report. Your investment decisions and recommendations are made entirely at your discretion. Selerity does not own securities in companies that they write about, is not an investment adviser, and the content contained herein is not an endorsement to buy or sell any securities. No content published as part of this report constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person.