"For all its complexity, IBM (IBM +5%) continues to emphasize a simple goal – growing EPS...

"For all its complexity, IBM (IBM +5%) continues to emphasize a simple goal – growing EPS through a variety of tools," writes CLSA. Big Blue's Q4 report and 2013 guidance indicate it remains quite successful in this respect in spite of minimal top-line growth, and the market is responding accordingly. As far as the top-line goes, UBS is encouraged by an upbeat earnings call and opportunities in focus areas such as emerging markets, analytics, and cloud solutions. ISI is more cautious, arguing IBM's valuation (12.3x 2013E EPS) is a little too high.

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Comments (3)
  • rickraff
    , contributor
    Comments (319) | Send Message
    IBM grew EPS at a 13% clip YOY in 2012. One would think they would enjoy a multiple of at least 13? BMO gave them a multiple of 14 and upgraded their target to $233. That sounds fair.


    The $16.70 estimate for 2013 is a lowball figure. They will report at least $17 in 2013! $17 with a 14 multiple is $238. IBM should trade between $200 and $230 this year.
    23 Jan 2013, 12:08 PM Reply Like
  • Storm Warning
    , contributor
    Comments (177) | Send Message
    Faking EPS "growth" through share buybacks is detestable. I might be able to accept it for a few quarters if everything else looks good but absolutely not when there is no revenue growth. What a sick joke.


    IBM has major problems - all the developed governments that might spend the big bucks for their services are cutting every contract in sight, and they're also reducing IT spending by switching from IBM products to Red Hat. Revenue growth will require some serious leaning on emerging markets and/or M&A "magic".
    23 Jan 2013, 12:12 PM Reply Like
  • Andreas
    , contributor
    Comments (29) | Send Message
    IBM will eventually earn $20 per share and trade for 15x or $300 per share...it may take a couple of years but it will get there...it is interesting to note that the latest Berkshire Hathaway annual report (2011) shows that Buffett accumulated his position at about $170 per share and that he bought about $10b of IBM....this is probably one of the very largest stock purchases he has ever made....and this is the greatest investor in the history of mankind....IBM has a rock solid business model which has held up well even in the toughest part of the Great Recession....it is a services and software business model with highly stable revenues....most importantly, IBM generates tremendous amounts of free cash flow....Wall Street is always heavily focused on sales growth but it is free cash flow that pays the rent....and share buybacks are a terrific use of free cash flow....it allows IBM to buy back 8% or more of the company every year....so even if the top line is not growing really fast, shareholders are getting a larger stake in the company every year....over time IBM will be able to dramatically shrink its share count and drive up EPS....IBM is exactly the type of compounding machine that Buffett loves....
    24 Jan 2013, 12:09 AM Reply Like
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