International Business Machines Corp. (IBM) is set to release FQ4'2013 earnings after the market closes Tuesday, January 21. Over the past few days there has been talk that the computing, data, and consulting giant will invest $1.2 billion dollars to build 15 data centers across the globe to expand its cloud services business. In addition, this year IBM will open doors for developers to collaborate with Watson, its Jeopardy champion super computer. The goal is to promote new applications which take advantage of Watson's superior artificial intelligence, and they could be a big trend this year.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for IBM to report $6.01 EPS and $28.283B revenue while our current consensus from 42 Buy Side and Independent contributing analysts is $6.03 EPS and $28.307B revenue.
IBM has met or exceeded the Wall Street profit consensus 5 times over the past 6 quarters. In 4 of those quarters our aggregate profit consensus was more accurate than Wall Street.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, we have created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations.
The magnitude of the difference between ours and the Wall Street consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a small differential between the groups.
The distribution of estimates published by our analysts range from $5.94 to $6.25 EPS and $27.284B to $29.164B in revenues. This quarter we're seeing an average distribution of estimates on profit compared to previous quarters. The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution signaling the potential for greater volatility post earnings, a smaller vice versa.
Over the past 4 months Wall Street has decreased its EPS forecast from $6.08 to $6.01 while our consensus has dipped from $6.06 to $6.03. Wall Street revenue expectations have dropped from $12.230B to $11.991B while our consensus declined from $12.025B to $12.017B.
The analyst with the highest estimate confidence rating this quarter is WallStreetBean who projects $6.12 EPS and $28.307B in revenue. In the Winter 2014 season, WallStreetBean is currently ranked as the 10th best analyst and is ranked 9th overall among over 3,400 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case the highest rated analyst is expecting IBM to report a similar revenue number to the expectations, but to beat by a significant margin on profit.
In the past few years IBM has benefited from the expansion of the cloud and has been a frontrunner in the industry. Recent talks of selling off the server business and expanding access to the Watson super computer have analysts optimistic about the company's near future.