IBM 2012 1Q results dis not show any visible growth. Revenue were basically the same as last year 24,7 bn.$ (24,6 bn.$) while generated Net Income before depreciation increased from 4,1 bn.$ to 4,3 bn.$. (Δ+4%).
Companies main market remain US which has around 43% and increased by +1%. Europe 32% and is down by +2%. Asia is up by +4% but has the smallest part 25%. Europe sales could decrease further while US and Asia increase during Y2012. Technology segment is up by +2% while Business is down by -2%. The most profitable are of Software is up by 6% mainly due to that profit has increased more then revenue. In general companies results are average.
Balance sheet remain very risky as Equity level don't seems to improve but just decrease from ~20% year ago to ~18% at 2012 1Q. Equity amount has decreased from ~23 bn.$ at 2011 1Q to ~20 bn.$ 2012 1Q. Due to low equity Return on Equity is something around 60%. Companies dividend and share buyback policy is very aggressive. Dividends and Share repurchases only at Q1 alone took over 3,8 bn.$ which is almost 90% out of 4,3 bn.$ earned Net Income before depreciation and compared to 3 bn.$ Net Income is even over 127% (!)
Financial receivables are only 25 bn.$ from total 115 bn.$ or 22% so low equity is not due to companies financing activity. If excludes ~23 bn.$ of financial debts due to financing services (stating average financing equity is 10%) and 2 bn.$ from equity, Equity level would only improve to 20% (18 bn.$/90 bn.$) which is unacceptable. Liquidity ratio is ~1,3 and has improved a little bit. In general companies balance structure is aggressive and unacceptable.
|Common Stocks||48,8 bn.$||1,159 bn.||42,1 $|
|+ Retained earnings||-28,1 bn.$||-24,2 $||17,9 $|
|+ 1 year Net income before Depreciation||20,9 bn.$||+18,0 $||35,9 $|
Companies share basic value is ~18$ (Δ+5%/17$ compared with Q4). Current market price is ~197$ (unchanged). which shows that market is paying 179$ more or 10 years (10,1 years) of Net income before Depreciation earnings, which is a lot taking into consideration that companies balance structure is very aggressive. Share profitability (Share market price/Net income before Depreciation) is 9,1% (Δ+0,1%/9%) which is a bit better then average and has increased a little bit due to reduced share number.
Company at the moment pays 3$/share annual dividends (0,75$/quarter) before tax or 1,5% investment yield, which is low. Since no growth is predicted dividend level should stay the same.
Analysis source: IBM First Quarter 2012 Financial Results
Previous analysis: IBM 2011 4Q financial analysis
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.